Against a sombre economic backdrop, the Chancellor today gripped the steering wheel of the UK economy. This is a budget that balances support for people on squeezed incomes with vital action to help grow the UK out of austerity. But delivery is everything.
Key successes for businesses were:
- Business rates – The growing burden of business rates is eating into the competitiveness of businesses with a physical presence, particularly in the retail and manufacturing sectors. Linking rates to the RPI measure of inflation is no longer appropriate as it will take the 2020 multiplier close to the 60p barrier - an unsustainable rate for businesses to pay. Switching to using the CPI measure would help to reduce this and will bring rates more in line with how costs are actually rising. Businesses are delighted by the Chancellor’s announcement to bring forward the switch from RPI to CPI to 2018/19. This is a big win for business as a result of a sustained campaign both by the CBI and other stakeholders. It will help free up resource for businesses to invest and support growth, helping boost competitiveness of firms with a physical presence, particularly in the retail and manufacturing sectors.
The frequency of revaluations is another sticking point of the business rates system. Revaluations are used to determine the business rates bill and are supposed to occur every 5 years. But property prices can change significantly from one year to the next. Setting a business rates bill on property prices from a few years ago is inconsistent with the economic cycle and therefore does not reflect a business’ true ability to pay. This was seen at the 2017 revaluation, wherein properties were assessed in 2015, compared to 2008. This covered the time of the financial crisis where property prices changed significantly and the disparities across regions were large. The CBI has continuously campaigned for more frequent revaluations, as this will allow business rates to be more responsive to changes in rents, improving the fairness of the tax. At the Autumn Budget 2017, the Chancellor announced a move to 3 yearly revaluations, which was welcomed by the business community.
- Brexit funding – We called on the Chancellor to commit to providing government departments with the resource to make Brexit a success and at this Budget, the Chancellor announced an additional £3 billion of funding to ensure government departments are equipped with the resources to ensure a smooth transition.
- Local infrastructure funding – The Chancellor followed the advice of CBI members by boosting transport infrastructure through an expanded National Productivity Investment Fund to £31bn, as well as outlining further details-specifically funding of £1.7bn-on the allocation of the Transforming Cities Fund. Making sure all regions can access the funding they need will be essential, especially where a devolution deal has not yet been agreed.
- Housing – The focus on supply rather than just demand is welcomed by businesses and people alike, in particular the measures to enhance the planning system, supporting SME housebuilders and increasing the Housing Infrastructure Fund were welcomed by members. All of these formed vital recommendations in the CBI’s 2016 housing report ‘No Place Like Home’.
- Innovation – The Chancellor’s recognition of the valuable role innovation and technology can play in tackling the UK’s productivity challenge was welcome, and new funding of £2.3bn, alongside a boost to the R&D tax credit, will ensure the UK is a great place for businesses to innovate and makes progress towards the target of spending 2.4% of GDP on R&D by 2027.
- Patient Capital Review – The Chancellor’s recognition of the value of high growth, high potential firms was welcomed by businesses, and in particular the funding for the British Business Bank, changes to the qualifying rules of the Entrepreneur’s Relief and the commitment to protecting the European Investment Fund in the Brexit negotiations will be welcomed by CBI members.
- National Retraining Partnership – The partnership between the CBI, the TUC and the Department for Education, announced by the Chancellor in this Budget will be an exciting opportunity to bring together businesses and employees to build a skills system that supports the 4th Industrial revolution.
There is still more government can do
The CBI is engaging with the government to make sure that Budget measures are delivered in ways that support your ability to invest and create jobs.
- We will push the government to ensure its Industrial Strategy is modern, practical, delivery-focused and with clear actions assigned to both business and Government.
- We will continue to work with government during the EU Negotiations to maintain the key principles of openness, stability and certainty of trade, immigration, regulation and funding shared by all.
- We will continue to urge the government to set out a vision for policy that enhances the attractiveness of the UK as a place to do business and is geared towards improving competitiveness of the UK economy.
- We will continue to press the government to make the apprenticeship levy work by delivering a flexible training levy that meets employers’ and individuals’ skills needs.
- We will work with the government to ensure any new rules on digital taxation don’t hinder the contribution that digital businesses make to economic growth.
- While the switch from RPI to CPI is a great fist step to relieve some of the immediate burden of business rates on firms, the rate of increase of the multiplier is unsustainable. We are calling on the government to undertake a review into the current business rates system, with a focus on looking at the sustainability of the multiplier over the next few years.
- We will campaign for a move towards annual revaluations so business rates more accurately respond to changes in the economic cycle.