There is nothing new in the Budget – that seems to be the general verdict of the media and political and economic commentators of Chancellor Alistair Darling’s latest offering. But is this assessment too glib? Certainly there are none of the headline grabbing moves that all pre-election Governments are tempted to take.
But clearly a ‘spend spend spend’ budget would be seen as seriously irresponsible in the current financial climate – particularly with the Conseratives and Liberal Democrats keen to get across to the public that they would curb public spending big time if they should be elected in the next few weeks.
From the recruitment industry’s point of view, there are two important aspects of the Budget which they must consider:.
- All the various incentives for SMEs that were announced for small business
- Job creation incentives which might create a greater demand for temps and perms .
To be fair to Alistair Darling, he has offered some quite useful help to SMEs which smaller agencies, in particular, should find useful. These include
- Temporary increase in small business rate relief for start ups and small growing businesses.
- More support for SMEs from Business Link and HMRC in terms of simplification of on line registration for multiple taces with one single form.
- A temporary increase in small business rate relief.
- Extension of the ‘Time to Pay’ facility to allow businesses more time to pay their tax bills
- Annual Investment Allowance doubled to £100,000
- Doubling the value of capital gains that can be made under Entrepreneur’s Relief
- Streamlining all the current government-backed funds for small businesses under the umbrella of a new UK Finance for Growth
- Recycling £4.1bn of repaid debt from Lloyds and RBS into loans for small businesses
- The appointment of a new small business credit adjudicator with powers of enforcement to ensure that small businesses have access to adequate finance
There are frankly not a lot of serious measures to stimulate jobs and what there is mainly relates to the bottom end of the market such as extending the Young Person’s Guarantee after March 2011; simplifying the system for working parents who claim the childcare element of the Working Tax Credit for short periods of time such as during school holidays; making the over 60s who work at least 16 hours per week, eligible for Working Tax Credit; increased funding for Jobcentre Plus; strengthening the Young Person’s Guarantee, which will provide up to 120,000 paid jobs for young people and a further 50,000 jobs for adults in areas hit hardest by the downturn.
Top end contractors and highly paid recruitment consultants will be adversely hit by some politically popular moves (at least among the less well-off) such as
- A new 5% rate of stamp duty for transactions over £1m from April 2011
- Freezing the threshold for inheritance tax until 2014-15;
- Increased penalties for those who do not comply with tax disclosure rules, and losing tax loopholes.
On top of these measures, a number of previously announced ‘hit the rich’ measures will come into force from next month such as the new 50% tax rate for incomes above £150,000 and from April 2011, restriction on tax relief on pension contributions for those incomes of £150,000 and over. Furthermore, employee, employer and self-employed rates of National Insurance contributions will increase by 1% from April 2011.
Mr Darling said that he was ‘determined to drive on with measures to tackle tax avoidance and evasion’. This could effect service providers that are still offering dubious offshore solutions
Darling caused some hilarity when he announced that Belize was now subject to an new tax dodge agreement. Belize, is of course, the home of Lord Ashcroft non-dom donor and deputy chairman of the Conservative Party.
The obvious gaping hole in the Budget and the background papers that went with it was the failure to address the key issue of how Britain ensures it has the appropriate labour force for the future. The Government has announced a Green Bank and has already launched Infrastructure UK which was established following the 2009 Pre-Budget Report to advise the Government on the long-term infrastructure needs of the UK.
However the Advisory Council contains no one from the recruitment industry and there seems little mention in its brief about the need to ensure we have the skilled labour force to meet future needs, particularly in the areas of transport and technology.
This Budget was probably the best The Chancellor could do in the circumstances but it still illustrates the short term nature of the UK’s financial planning.