Rachel Reeves, the Shadow Chancellor, has set out her tax and spending plans for the next five years. She assures us that these plans will play a role in providing this flexibility. Yet this announcement comes as many businesses are facing unprecedented changes due to the pandemic. The government has now moved to remove a 40% discount brought in during the Covid pandemic.
Beginning in April, most of these companies will no longer benefit from this large discount. Business owners are already sounding the alarm over the damage this change will do. Sadly, the government’s action comes at a time when businesses across the country are already facing sharply increased rateable values, creating an additional burden.
Around 750,000 small high street retail and hospitality businesses will have their business rates reduced. Their algorithm will now be based on a much-reduced share of their premises’ rateable value. While this fix will bring some temporary reprieve, it has not been as forgiving as many expected.
They had a remarkable win in avoiding a £25 billion hike in employer national insurance contributions that had been agreed in the last budget. However, despite these recent amendments, many companies are still asking what it will ultimately mean for their businesses.
That’s fantastic news for younger workers! The government has just proposed an 8.5% pay increase for 18 to 20-year-olds paid at the national living wage. The same age group received a whopping 16.3% increase just last year. This adjustment is intended to offset the pressures that younger workers are experiencing due to escalating costs of living.
The budget included provisions to expand the Enterprise Investment Scheme and Venture Capital Trusts, which will offer tax breaks to investors in young companies. These programs are intended to catalyze additional private investment in those businesses which can prove they have the best likelihood of growth.
Strong concerns linger about the overall direction of the federal government’s efforts. Steve Rigby, a local business owner, expressed his concerns about the changes.
“We just hope it isn’t too catastrophic for business and we can get on with it.” – Steve Rigby
FTSE 100 executives have hit back angrily against the changes as well. As one of the CEOs of the companies in our database put it, current policy is killing job creation and economic growth.
“They are hurting the very people they are trying to help and it will mean fewer jobs, fewer hours, fewer premises, lower growth.” – FTSE 100 boss
In reaction to these challenges, a Treasury spokesperson doubled down on the budget’s focus on long-term economic growth.
“This Budget doubles down on our long-term plan to grow the economy and create good jobs.” – Treasury spokesperson
As companies continue to adapt and adjust to these changes, many are still blindly swimming in the wake of uncertainty about their future. The next few months will determine whether that all changes. Firms will adjust to new tax structures and wage increases as long as their operational costs are kept in check.