Budget 2016: What Yorkshire businesses want the government to deliver

As Chancellor George Osborne prepares to deliver his eighth budget on Wednesday, March 16th, Bdaily wanted to ask the business people of Yorkshire for their views and opinions on what they want to come from first major economic statement of 2016.

Devolution

Chris Hearld, KPMG’s Chairman of the North, wants the budget to to produce anotherdevolution deal in Yorkshire.

Chris said: “Devolution is matter of regional and national prosperity. The current centralised system of governance is too rigid and devolution offers the exciting prospect of replacing this with more local systems that reflect the voices and priorities of citizens and the businesses that will create the wealth to sustain regional economies.

“Getting the devolution position in more of Yorkshire sorted is in the interests of the North as a whole. It is an important enabler for ongoing progress with the concept of the interconnected region against a backdrop of greater certainty.

After all, the Northern Powerhouse is a city region-led vision, so a framework that enables those leading key cities to make bold choices when it comes to investment, for example in infrastructure, is valuable.

“Yorkshire must, therefore, quickly build on the Sheffield City Region devolution deal. If the only option in the near future is a Leeds City Region deal, then I hope news of progress towards an agreed deal will be announced by The Chancellor on Wednesday.

“It would mark forward movement at a time when there are concerns that progress has stalled and should be welcomed as a pragmatic start point, offering a framework for wider collaboration and cooperation across Yorkshire and without standing in the way of other deals.

“So, I do hope George Osborne is planning to empower those driving the economy in which I work and am passionate about, to make changes that help to generate wealth on their own doorstep and better position them to collaborate with fellow regional leaders for the greater good on matters that could support Northern Powerhouse vision.”

SME support

James Turner, managing director of Turner Little, a York-based company with offices in Sheffield and London specialising in company formation and consultancy, believes the budget should offer more support to smaller firms and startups in the region.

James commented: “My aspirations regarding the upcoming budget would be for the government to offer greater support for new and smaller firms in the region.

“Firstly, if local authorities were permitted to offer start-ups a two year rate-free period on property, this would significantly benefit companies during the initial starting up period. Secondly, another major benefit would be to double the VAT threshold so that companies can turnover up to £164,000 and remain free from this tax. Both of the above will help companies grow and become more stable to more comfortably handle these costs.

“I am particularly interested in what the government is doing for businesses, both new and established, in our area. At present, there’s very little, if anything, which could be directly linked to government policy to support or encourage new Yorkshire businesses. While I expect the Chancellor will draw on the Northern Powerhouse, this is unlikely to actually bear much substance since, with the possible exception of Leeds and Sheffield which attract occasional support due to the allegedly forthcoming HS2 link to London, the government does very little to support Yorkshire SMEs.

“It’s unfortunately because of this that, especially as there is not an election coming up and the government is concentrating efforts on the approaching referendum, I do not expect the upcoming budget announcements to help those in our area.”

Tax

Award-winning business coach Pam Featherstone, who founded Hull Business Coaching in 2012, spoke on a number of issues ahead of Wednesday’s budget.

Pam said: “As Chancellor Osborne is committing not to raise income tax, VAT or NIC, he will have to turn to alternative measures in order to balance the books. I believe that the austerity measures that were expected in the Autumn Statement will appear this time around.

“Osborne is certain to use the Budget to canvas for support for an ‘in’ vote at the referendum in June.

Tax - “Osborne is likely to announce further measures to improve transparency and to tackle tax avoidance to reassure the public that the government is focused on making the UK a fair and transparent tax destination for businesses. Salary sacrifice arrangements, which enable employees to choose between cash and benefits including pensions, annual leave, childcare and other benefits, could be targeted to raise more revenue.

“I expect Osbourne will reveal further details on the Business Tax Roadmap, to provide more clarity on business taxes. The difficulty will be to ensure that essential infrastructure projects continue to get tax deductions for their borrowings. Osbourne may be forced to do a U-turn on the Business Tax Road map if the EU referendum results in the UK leaving the EU.

“Entrepreneurs’ relief is one of the most valuable reliefs in the capital gains tax system and regretfully I think it will be cut. I think he will announce the implementation of digital tax to accelerate tax payments so that tax is paid closer to when profits / income are earned.

Business rates - “Despite the fact that the business rates system is out-dated and well overdue for a reform, the changes that have been bounced around will not change the actual revenue so I believe that despite pressure from major retailers, Osbourne will not address this in this budget.

Pension Reforms - “Although the Treasury has suggested that radical changes to pensions tax relief should not be addressed right now, I do think that Osbourne may announce some longer-term plans for change and may still include some types of reform.

Emergency Budget - “I believe he will have to hold an emergency budget in July if the UK votes to leave the EU in the referendum in June. So plenty of changes ahead!”

Living Wage

Graham Thompson, managing director of Wakefield-based workwear and clothing specialist, Xamax, discussed the impact of the government’s Living Wage rate.

Graham said: “The introduction of a compulsory living wage looks fantastic on paper and will be welcomed by most employees, but when you delve deeper you realise this change will only put money back into the government and place greater pressure on UK manufacturing businesses.

“For a small business, where a vast number of employees are on or just above the national minimum wage, the rise will have a devastating impact. For example, if a trainee’s wage increases to £7.20 per hour the more skilled workers who are on a similar level of pay will also want a rise.

“This results in an increase of the wage bill across the whole of a business, forcing companies to cut jobs, reduce staff working hours and pass on additional costs to their customers. It’s a reckless way to impose a massive burden on small businesses and risks creating a harmful rise in inflation, when a company has no choice but to increase its prices.

“Whilst I agree that persistent low pay needs to be addressed, in order for businesses to pay the national living wage without it significantly impacting on a firm’s bottom line, the government needs to offer something in return whether it be a reduction in business rates or tax. As it stands, the increase in national living wage will further hinder businesses that are trying their hardest to make a profit and ultimately stabilise the economy.”

Pensions

Richard Little, tax partner at KPMG in Leeds, believes the budget should finally introduce a ‘business tax roadmap’ and pensions.

Richard: commented: “The Government has an opportunity to set out its stall when it comes to taxation and we’re hopeful that the promise of a business tax roadmap will come to fruition this Budget.

“In 2010, businesses across all sectors welcomed the introduction of a corporate tax roadmap, as not only did it confirm the Government’s direction of travel, it helped organisations to plan for the future. There’s no denying that businesses need further stability and a long-term plan would certainly be welcomed by many.

“We hope that the Government doesn’t use the roadmap as cover for a widening of the tax base applicable to all companies, but it is clear that responses to pressure on international tax could impact many more businesses than just US multinationals trading in the UK.

“In addition, there’s been further speculation regarding the major reform we could see when it comes to pensions and it’s one area that could help bring the budget back into surplus.

“But, this comes down to the question of economics versus politics, and with a Chancellor keen to curry favour ahead of the EU referendum, leaks to the press over the past few days suggest that there will not be fundamental reforms to the taxation of pensions in this Budget.

“One thing’s for sure, Osborne has proved in the past that he’s adept at pulling rabbits out of hats and we would be naïve not to expect any surprises on the day. In a move to please voters ahead of the impending referendum, we may see changes to the personal allowance and higher rate threshold with the Chancellor potentially reducing the additional rate of tax from 45%, perhaps back to 40%. This would be a radical move, and while unlikely, all bets are on for what we might see introduced on Wednesday.”