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ACCA Comments on the Autumn Statement

ACCA Comments on the Autumn Statement

• ‘Winters of discontent’ for most public services
• Tax complexity still rules, with NIC and Income Tax gap broadening
• Spending boost for SMEs welcomed

Chas Roy Chowdhury, ACCA’s head of taxation:

“This is an ‘investing’ Autumn Statement, with no tax cuts, and with money pouring into the NHS, roads, transport and new civic power. The Chancellor’s spending plans give the false impression that the coffers are full ahead of the general election, but we are concerned about how sustainable this spend actually is during what are still economically turbulent times globally.”

Stamp Duty

We have been asking for this for years – making this tax progressive is important. Abolishing the single slab rate is a welcome move to end the significant distortions of this burdensome tax. Leaving this to the end of the Chancellor’s statement was clearly designed as a vote winner.

Tax Stability

“We have a very complicated tax system – for businesses and for individuals - so no tax cuts is good for the economy to bring about a period of stability to help people and businesses plan for future. It would also allow HMRC and the Office of Tax Simplification to do much needed work on making the system easier for everyone.

The new tax – diverted profit tax - is also welcomed; this is a good news, as long as it doesn’t cause multi-national flight from UK. Tax evasion measures are welcomed, but we need to be realistic and cautious about the yield from those measures.

Corporation tax in Northern Ireland

“This is a welcome move, and one that has been too long to deliver. There are clear and fundamental economic reasons behind the proposals rather a politically driven reason as would be the case if the same tax were devolved to Scotland. The Irish rate of Corporation Tax is 12.5%. Northern Ireland needs to consider matching that. Northern Ireland has suffered negative earnings growth in the year to April 2014 and employment increase has been one of the lowest in the UK in that same period – so there is clearly a need to readjust and rethink.”

Income Tax and National Insurance

“Income Tax and National Insurance need to be aligned; the divergence between them can cause distortions. For example, if Income Tax started at £12,500, that should also be the starting point for National Insurance. Parity is needed. But we welcome abolishing the jobs tax on apprenticeships under 25 – this is a great idea.”

Gillian Fawcett, ACCA’s head of public sector:

“The Chancellor’s statement breeds ‘winters of discontent’ for most public services. Whilst money is being pumped into vital health services and infrastructure other services are being put out into the cold over the next five years - the squeeze is continuing in other parts of the public sector.”

The outlook for public services is bleak. The public sector balance sheet for 2013 shows net liabilities of £1.6 trillion (but this excludes the state owned banks). If Government was a company it would be bankrupt. NHS hospital trust deficits in 2014 were reported to be £745million in deficit (a 150% increase compared to the previous year).

This required an emergency injection of cash and now the government is pumping in another £2bn, in part made up of recycled underspends from other departmental budgets. Irrespective of the political short-termism employed here you can only recycle budgets so much before the money runs out. In addition, concerns about the financial sustainability of local authorities were highlighted by the NAO with 16% of single tier and county councils not being able to meet their budget plans and 52% of all councils not being able to fulfil their three year financial plans. On top of this the public sector has had a pay freeze of around three years with a below inflation pay rise of 1% in the immediate period up to the next spending review.

“There is little doubt that public services will have to think smarter and be braver about how they plan their future finances. It will be simply not good enough to approach budget cuts as ‘slicing the salami’ as there will come a time when there is ‘no salami left to slice’. The challenge for both government and public services is to rethink what sorts of public services are needed for a modern day society and plan the resources accordingly.”

This was posted in Bdaily's Members' News section by ACCA .