Member Article

Autumn Statement - in my opinion

I have two views of the Autumn Statement, firstly as an adviser to business as a whole, and second as an adviser to North East businesses. The two views are quite different.

In terms of a typical SME operating “somewhere in the UK”, the Autumn Statement had a number of real positives, but also some rather baffling omissions.

The positives included extensions to the R&D Tax Relief (and R&D Expenditure Credit) mechanisms which provide direct funding to companies who are carrying out innovation. The R&D tax relief mechanism will be streamlined for SMEs so that an “advance assurance” will be able to be obtained from HMRC, which will give comfort to the company who is claiming that they will be able to successfully benefit from the tax credits available. In a pilot programme run by HMRC in 2011, Tait Walker obtained one of only 30 such advance assurances issued nationally and our client company was able to rely on the assurance given to then make a decision to invest in further staff for their R&D.

There were extensions announced to exemptions from Employer’s NIC for companies who employ apprentices and also to the £2,000 annual Employment Allowance. The continued doubling of business rates relief for small businesses for a further year, together with the cap on the index linked annual increase and £1,500 credit for small retailers, is clearly welcome – and the announcement of a wider review of business rates could lead to a rebalancing of this cost away from its current focus on employers who need to utilise space to create jobs.

What we did not get, was confirmation of any extension of the Annual Investment Allowance, so we still could face a “cliff edge” on investment in capital expenditure on plant and machinery at December 2015. Likewise, with the exception of the Social Investment Tax Relief, there was no major encouragement for Venture Capital investment into SMEs.

However, from the North East’s point of view, I would classify the Autumn Statement as a real disappointment, primarily because we also saw what has been provided to other regions.

Whilst I am not a subscriber to the view that the North East needs continual financial support, the Autumn Statement has done a very good job of highlighting quite starkly how little the region may benefit when we compare what is being provided to the North East to the measures being provided to other regions of the UK.

The Chancellor referred repeatedly in the Autumn Statement to the aim to create a “Northern Powerhouse”. I would suggest that the measures outlined are probably best described as encouraging a North Western-biased Powerhouse. The Autumn Statement documents a map of what investment is to be made across the UK and the levels of investment promised to the other English Regions compared to the North East is plain to see.

For example, each of the North West, Yorkshire and the Humber are receiving more than twice the investment in improving the condition of the road network compared to the North East. The North West will benefit from £235m for a new facility for materials research at Manchester University to be called the Sir Henry Royce Institute, which will also have branches in Leeds, Liverpool, Sheffield, Cambridge, Oxford and London. There will also be a £113m investment for a big data research centre in Hartree, Daresbury. The North East region by comparison will get £20m towards an Innovation Hub for Ageing Science in Newcastle, and there will be investment in a High Value Manufacturing Catapult in Sedgefield to complement the existing High Value Manufacturing Catapult.

In terms of driving inward investment, each of the devolved assemblies of Scotland, Northern Ireland and Wales have had clear commitment to giving them powers to take greater control of the finances of their regions, which will enable them to develop their economies with less reference to policies being set in Whitehall. The Chancellor has committed to taking forward the devolution of income taxes and VAT arising in Scotland to the Scottish Government, Northern Ireland is being given a path to take control of their Corporate Tax rates and the Welsh Assembly are to be given the power to vary business rates.

The devolution of control of taxes to those regions of the UK may make it less likely that the North East will be attractive to inward investment. The simple reason is that the devolved assemblies can tailor their local taxes to create economic reasons for an inward investor to go to those regions in preference.

There are a multiplicity of reasons for this imbalance in favour of other regions – and partly it is down to the political landscape – but it is also being contributed to strongly by the simple fact that other regions are doing a much better job of asking for assistance in a loud and cohesive fashion.

The Chancellor did make it clear that there are some areas where his future policy will be dictated by who asks the best questions. For example, he has made it clear that Enterprise Zones remain in favour and it is up to local regions to put forward a business case. The Broadband Connections Vouchers scheme, to encourage super-connected cities, is currently only available in Newcastle, however other cities can apply to qualify.

I would suggest that it is time the North East properly considered what tax incentives it needs to compete evenly, and starts to ask with a united voice for localised tax policies which assist the North East as a whole.

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