George Osborne has unveiled his Budget for 2013, here is the latest reaction from across the business world.
• Budget 2013: full coverage • Budget 2013: live • Ian Cowie: 3m freed from income tax but 4m pay higher rate • Thomas Pascoe: deficits until 2018 are symptom of failure • Philip Aldrick: Osborne makes last-ditch bid for growth • Ian Cowie: even estate agents worry about house price bubble
= John Walker, national chairman, Federation of Small Businesses =
The Budget opens the door for small businesses to grow and create jobs. The Chancellor has pulled out all the stops with a wide ranging package of measures to support small business. FSB says the housing initiative will help reinvigorate the construction sector in which many of our members operate. The National Insurance cut goes beyond what we were asking for and we are pleased to see the scrapping of the 3p fuel duty due in September.
Simon Walker, director general of the Institute of Directors
We applaud this Budget. The Chancellor has stuck to his guns and held his nerve - which is exactly what we wanted to see. Deficit reduction is not an optional policy, it is an absolute necessity, and he is right to reject the siren calls to abandon it.
Businesses will be glad that George Osborne has also continued the downward pressure on Corporation Tax. Britain must become the most competitive place to do business, and lower taxes will attract welcome investment from abroad.
The new allowance to reduce the tax on employing people is a welcome boost for businesses who are working hard to grow. The private sector has done a huge amount to improve the employment figures, and it is right that they are rewarded for doing so. This will see more people helped out of unemployment, which is a very good thing.
We have long called for a co-ordinated set of policies to encourage the development of a UK shale gas industry. The Chancellor is absolutely right to set attractive conditions for shale exploration - this will create thousands of jobs, and reduce our reliance on expensive foreign imports.
Christopher Vecchio, Currency Analyst at DailyFX
The British Pound rallied after Chancellor Osborne’s Budget announcement in parliament today, but the focus is much less on the fiscal picture. The fiscal side of the equation remains muddled, with the government cutting the 2013 GDP forecast to +0.6pc from +1.2pc, and the 2014 GDP forecast to +1.8pc from +2pc. Instead, the impetus for the Sterling’s rally was the slight alteration in the Bank of England’s remittance, which would allow for “forward guidance,” a policy that the Federal Reserve uses to communicate policy more effectively.
Steve Radley, EEF director of policy
Although it seems most of the Funding for Lending Scheme benefits have so far flowed to mortgage lending, the lending landscape for small businesses is far from fixed. As such, it is a positive commitment that the Bank of England and Treasury are looking for ways to adapt and improve the scheme rather than signing its obituary.
Clare Francis, editor-in-chief at MoneySupermarket
George Osborne has attempted to give something back by raising personal tax allowances to £10,000, helping with childcare and freezing planned rises on fuel duty. This may, however, be little comfort to UK households who are facing unprecedented pressures on their wallets. Households around the country are suffering and the Government needs to think hard about the long term effects of austerity measures on these people, as the impact could last for decades.
Giving with one hand may be a positive, but taking away with the other through other tax increases and benefit cuts means that people are no better off. In fact, the cumulative effect of this and previous budget changes, combined with wage stagnation and rising living costs means millions are worse off and an increasing number of families are on the breadline, struggling to make ends meet every month.
Our own research has shown that three quarters of households have had to limit spending over the past twelve months, while one in ten miss meals to feed their children, while a fifth have not been paying essential bills in order to cope. More needs to be done to help families the Government needs work harder to tackle rising everyday costs, such as heating, food and fuel.
Fiona Weir, chief executive of Gingerbread
While we welcome the Government’s investment in childcare, 2015 feels like a very long time to wait for low income single parent families, who may not have a car, a 5pc house deposit or a fondness for beer, but who are struggling to pay their bills and put food on the table today.
Despite very little being said on welfare in today’s Budget, within two weeks the devastating welfare cuts announced by the Chancellor in December will begin to bite. These are cuts that will push more children into poverty.
Added to these cuts, the Chancellor’s oblique reference today to capping areas of welfare spending is deeply concerning. This threatens further pain for families who have already borne the brunt of welfare cuts. We will be looking to the spending review for measures to support, not punish, those on low incomes.
With growth down and the borrowing up, the overriding message from the Chancellor is that it's still up to the private sector to drive the recovery. Thankfully, the Chancellor managed to pull some quite interesting rabbits out of the hat with specific pro-business measures. Infrastructure, innovation, enterprise and employment were the areas that businesses were looking out for, and continued investment in roads, rails and broadband and extensions to schemes to encourage private sector investment are welcome.
It's essential that the UK continues to be a destination for big business and investment and continued cuts to Corporation Tax and support for R&D are good news. The UK has a strong history of innovation and that has always seen us punch above our weight on the global IP stage, and measures like those revealed today will help ensure it continues.
In the run-up to the Budget, our customers placed measures to boost employment at the top of their wish lists and the employment allowance which reduces every business' National Insurance payroll taxes by £2,000,
Len McCluskey, Unite general secretary
This is a Budget for the few by the few that attacks the many. Millionaires are days away from getting a £40,000 tax cut from the Tories, but George Osborne is using the budget to attack hard-working public sector workers. The worst chancellor in British history has gone further by giving big business another tax cut while staff caring for the sick get pay cuts. This Chancellor's idea of aspiration is a warped one. Nurses, police and public servants take a pay hit, while corporations and millionaires are allowed to duck their tax duties to the nation.
Borrowing is up, growth is halved again and the Chancellor is missing his debt targets. His litany of failures has left Britain hamstrung and there are no measures in the budget to give the economy the major boost it needs now. He is lining up the nation for further gloom and cuts in June through the spending review. His government means more misery for the majority.
The heralded £10,000 tax threshold offers little hope other than an extra pound or two in low waged workers' pockets, while again helping the higher-waged.
If he really wanted to show he was on the side of the worse off, who aspire to get through the week, he should have raised the national minimum wage by £1 and drop the senseless plan to give millionaires a tax break in a few days' time.
Joanne Segars, chief executive of the National Association of Pension Funds
We strongly welcome proposals for a new, single tier state pension. But the Government has to ensure that the changes are implemented in a way that does not damage company pension schemes. This is a very tight timeframe and we question whether it can be delivered. Schemes need flexibility and time to adapt.
If the Government gets it wrong then it risks sparking a fresh round of final salary pension closures in the private sector. Businesses that get caught on the wrong side of these changes will lose a significant rebate from the end of contracting out, and this extra cost may prompt them to close their pensions altogether.
We have waited many years for these reforms. An overhaul of the state pension is long overdue and a simpler, fairer system helps set a clear foundation on which people can build their own savings. It would be a shame if mistakes were made in a rush to implement the changes.
Peter Cosmetatos, director of finance at the British Property Federation
The announcement of an informal consultation on the potential inclusion of REITs in the 'institutional investor' definition is very welcome, as this is something we have been asking for. If the Government can be persuaded to make this change, it will ensure that the UK REIT sector can get the greatest value from the “institutional investor” relaxation of the diverse ownership rule last year and the 'REITs investing in REITs' rule change being made this year. Allowing REITs to be considered as ‘institutional investors’ will allow REITs to hold significant interests in other REITs, and use the REIT wrapper as a vehicle for attracting capital into joint venture arrangements.
Chris Cummings, chief executive of TheCityUK
We look forward to working with the Government, our members and the wider financial and related professional services industry to extend the promotion of the sector overseas, helping the UK to compete more effectively in those regions and countries that offer the most opportunities for growth.
This will be vital to promote the UK as a place to do business and to continue to bring jobs and growth across the UK. There are international markets which offer great potential to the UK, including the BRIC nations, GCC countries and Turkey as well as other Asian markets and Latin American economies.
UK financial and professional services are vital for the UK's economic wellbeing and future prosperity, contributing £195bn to the UK economy in 2011 and accounting for 14.5pc of total economic output. The sector has generated a trade surplus of £55.5bn, roughly the same as the combined surplus of all other net exporting industries in the UK."
TheCityUK also welcomes the wide range of positive measures announced in today's Budget in support of the UK's financial and related professional services industry."
Phil Orford, chief executive, Forum of Private Business
The Chancellor was absolutely spot on to make this decision today. No one wants to see fuel prices any higher than they are and small businesses will welcome that. Let’s not forget though that prices are fast approaching record highs any increase would have been reckless so this was just basic common sense.
We still feel the Government needs to implement some kind of fuel stabiliser. The only way we’re going to see anything approaching a fair price for fuel in the UK will be via a mechanism that works to bring fuel tax down when prices are high. Such a system would mean prices as they stand now would not be hovering just shy of £1.50 and taking money from the pockets of consumers better spent elsewhere in the economy.
Unfortunately the UK will now suffer for another year at the mercy of fluctuating oil prices right when we need it least because of the Chancellor’s failure to introduce such a system.
Ian Fletcher, director of policy at the British Property Federation
It's encouraging the Government’s confidence in build to rent has been reciprocated and we are delighted to see that the equity funding was heavily oversubscribed. Working in partnership with Government the sector should deliver an exciting and quality array of homes for renters... This is a strong package of help for housing. Annual transactions are half what they were and that has a knock-on consequences for all those parts of the economy that rely on people moving. Helping people needing a deposit has for some time been cited as the missing piece of a coherent housing policy and both is therefore welcome.
IHS Global Insight
The growth forecast for 2013 looks entirely realistic, but we have doubts that the economy can achieve the projected expansion rates from 2014 onwards. We suspect that the economy will struggle to grow by more than 1.5pc in 2014 and given the economy’s deep-seated problems it is hard at this stage to see the economy growing by 2.7pc in 2017 and 2.8pc in 2018. As a result, we suspect that there is a real very danger that there will be more slippage in the budget deficit and public debt figures.
Nancy Curtin, CIO of Close Brothers Asset Management
Faced with a flat lining economy, simmering Eurozone tensions and an election just two years away, Osborne was never going to have many options on the table. He’s been wedded so long and so vocally to his plan A of fiscal tightening and austerity that any major deviation would blight his political future.
Although this fiscally neutral budget had some interesting nods to a rudimentary Plan B - foreshadowed steps to encourage the development of Britain’s shale gas reserves, and the reduction and simplification of the corporate tax regime should all play well in the City - it was really more about monetary easing.
Governor Carney’s new flexible remit paves the way for more QE and a flexible approach to inflation targeting clearly modelled on the path the US Fed has successfully taken to boost its economy. However, this is not America, and the numbers aren’t good (0.6 pc growth in 2013/4) so whether we can avoid rampant inflation and, more importantly, a further credit downgrade remains to be seen.
Dr Gordon Edge, RenewableUK Director of Policy
These low-carbon infrastructure projects will help us future-proof our economy and reduce what we have to pay to import expensive fossil fuels. Offshore wind is a proven technology which we have the opportunity to lead the world in and help us win the ‘global race’ that the Chancellor spoke about - it should be a real priority for govt to drive forward in our energy mix. With offshore wind we know what our resource is and what it'll cost to develop, compared to less proven technologies. We hope that the upcoming offshore industrial strategy will recognise this and bring forward concrete measures to ensure that the maximum economic benefits can accrue to the UK.
Debbie Griffiths, private markets tax partner at Deloitte
There can be little doubt that encouraging employee ownership is good for the UK economy. It is therefore ironic that smaller companies can sometimes find it more difficult to achieve than quoted companies. Anything that makes it easier for these smaller businesses to deliver shares to their employees will be welcome. The Government’s proposals to offer people extra tax relief for giving up some employment rights may be attractive to a small number of employees joining start-ups. However, for the employing company, if they wish to keep to the minimum £2,000 tax free value, this could be complex to administer.
Nigel Waterson, chairman of the Equity Release Council
The anticipated cap of £72,000 on individual contributions towards long-term care costs still leaves many people struggling to make their budget sheets add up in later life. One in five UK adults told us the Government should implement the £35,000 cap recommended by the Dilnot Report and one in three said the State should cover the full cost of care for everyone.
Today’s Budget may help people to understand what support they will receive once they retire but unfortunately, any suggestion that lowering the cap will be enough to meet our ageing population’s care needs is wishful thinking. An even lower cap may also be wishful thinking, especially in the current climate, but it shows how concerned people are about how they can afford to support themselves in later life.
The Lords Select Committee report Ready For Ageing? estimated that people over state pension age owned roughly £250bn in home equity that could be released in 2009, and that this would increase by 40pc by 2030. When other sources of funding are so stretched, using equity release products to access this capital in a secure way is a practical and common-sense solution to a problem that will not go away.
Chris Morgan, head of tax policy at KPMG
The [tax] changes announced today show the benefit of an open and constructive dialogue between HMRC and business. The stated intention of the new rules is to change future behaviour, to ensure companies bidding for Government contracts do not engage in tax avoidance, contrary to thre intention of Parliament. But as drafted they were so wide and unclear in scope that either it would have been impossible to apply them or they would have resulted in lengthy legal disputes. Either way this would have been bad for business and the Government. The changes bring much greater clarity and mean suppliers should be able to get on with their business of proposing for contracts while the Government can ensure companies do play by the tax rules. Overall this was a business-friendly budget on tax. There were lots of juicy tax carrots, and a very large stick.
Ian Brinkley, director of The Work Foundation
The Budget measures will have no measurable impact on economic prospects. The priority should have been significant new investment in science, technology and innovation and in measures to address youth unemployment, rather than corporation tax cuts. The new employment allowance for new hires is likely to be less wasteful than some past schemes, but will only have a limited impact on the labour market.
Mark Wood, chief executive of employee benefits at JLT
The Budget illustrated a clear connection between pensions and economic growth but the quest to kick-start the economy must not compromise the integrity of UK pensions.
Whilst recognising the pragmatism of the Chancellor’s decision to require the Pensions Regulator to take into account the growth prospects of companies when considering their pension schemes, the mechanics behind how this will work remain vague. It is imperative that the integrity of the pensions system is protected, conflicts of interest are avoided at all costs and that, ultimately, the interests of scheme members remain the overarching priority. When the precise wording of the objective is set out by the DWP in legislation later in spring 2013, there must be no ambiguity or room for regulatory arbitrage.
By 2050, more than a quarter of the population will be over 65 and the 'pensioner’s pound' will be a vital component in supporting consumption and the economy. This Budget ostensibly constructed to focus on stimulating growth addressed the issue of a widespread retirement shortfall to the extent that the implementation of the single tier state pension a year earlier than planned was confirmed. More needs to be done, however, to avert a pensions crisis and to stave off the concomitant severe economic aftershock. One way to help tackle this problem is for the Government to establish vehicles for pension funds to invest in infrastructure projects, through the issuance of long-dated, inflation-linked infrastructure bonds, which would provide an appropriate yield for pension funds whilst also helping them stimulate economic growth.
Andrew Pendleton, head of campaigns at Friends of the Earth
This is yet another fossil-fuelled Budget that will leave the UK struggling in the wake of forward-thinking nations that are already investing in the clean industrial revolution. Our economy desperately needs new ideas, but George Osborne is a 19th century Chancellor, using 20th century tools to fix 21st century problems. A few crumbs of comfort for the green economy are dwarfed by his enthusiasm for new oil and gas. That will cut little ice with the major energy investors demanding he commit to a clean, resilient and future-proof economy.
Ben Wakeham, entrepreneur and founder of VIDA FX
As an entrepreneur and the founder of a fledgling business I was really encouraged by much of what the Chancellor has to say in the budget.
One of biggest factors stopping small businesses employing more people is National Insurance payments, so removing this burden from 450,000 of the nation’s smallest business is a positive move. Also it’s good to see that Government procurement for small firms is going to increase five-fold.
However, I would have liked to have seen more action on encouraging the banks to lend more to small businesses.
Programmes like Funding for Lending initiative and the Business bank are good ideas and it is right that the Government promotes them but they need to be actioned now not scheduled for later on in the Parliament.
Nick Sanderson, chief executive of Audley Retirement
While extension of the Help to Buy scheme is welcome news for the construction industry and the wider economy it is an initiative that continues to blindly focus on first time buyers. Providing 15,000 affordable new homes would be a noble ambition if it weren’t for the huge numbers of under occupied family housing stock that could be brought to market.
In the past week we have heard from Jack Dromey MP that there is an acute lack of specialist housing for older people in this country. Yet, the HAPPI2 report, published in November (Xetra: A0Z24E - news) 2012, states that if 2pc (84,000) of the older people presently under-occupying their homes moved into retirement housing, 400,000 people could find their housing needs met.
Camilla Wallace, tax specialist in the private client group at London law firm Wedlake Bell
Given the noises from Government recently, the measures aimed at aggressive tax avoidance were no surprise and no-brainers. Increasing the collection of taxes by reducing rates, implementing further anti-avoidance legislation and entering into additional international agreements with traditional tax havens are obvious measures. Still, the message for anyone trying to be too clever with avoidance is this: If you're owed money you seek repayment expect the UK Government and HMRC to do the same.
Gordon Sharp, director at KPMG’s pensions practice
Whilst this is a welcome simplification of the state system that will benefit lower earners in particular and the self-employed, it does give employers with open final salary pension schemes less time to make necessary readjustments to compensate for the higher national insurance bills that they will face. This measure will put an extra 3.4% on their NI bills. Whilst public sector schemes will be obliged to remain open, this measure is likely to speed up the closure of private sector final salary pension schemes.
Chas Roy-Chowdhury, head of taxation at ACCA
This will go down in history as the bland Budget. At a time when the economy is stuttering, it needs a genuine boost. Cutting the basic rate to 15pc until April 5, 2014, would have been a brave move by the Chancellor, but would help working families across the UK. Under today’s proposals they, and many others, will not notice any difference. A temporary tax cut seems drastic but these are exceptional circumstances.
Matthew Barling, PwC banking tax partner
The bank levy rate has now risen by over 80pc since it was introduced in 2011. This is a major cost for banks operating in the UK and is not a good advert for the City of London (LSE: CIN.L - news) 's competitiveness as a global financial centre, particularly at a time when this is already under threat from other quarters.
Chris Meredith, chief executive of Officebroker.com
The Chancellor made some really positive comments in the budget which will go a long way in helping the nation’s SMEs.
The proposed cuts to Corporation Tax and the new £2000 employment allowance will give small and medium companies the confidence to expand, and ultimately create private sector employment.
When you start your own business there are a plethora of costs which have to be taken into account and these only increase as our company expands. So removing National Insurance costs for 450,000 UK SMEs is definitely a step in the right direction.
However, we would have liked to see the Chancellor take action on empty property rates (EPR). Within the flexible workspace industry this has become a tax on business growth and even job creation.
Flexible workspace offers an environment in which businesses can find their feet and grow, but EPR places a burden on those providing this environment and can restrict its effectiveness.
Addressing this issue would help bring property back into use and make existing space easier to access and more affordable for new and fledgling businesses.
Michael Wistow, head of tax at City law firm Berwin Leighton Paisner LLP
It can only be good news to reduce corporation tax rates from 2015 to 20 per cent and to abolish transfer taxes on AIM shares and to have an emphasis on reduced tax rates which result in the rich paying a higher proportion of total taxes raised than the populist concentration on rates of tax.
The abolition of schedule 19 is an example of how the government can use the tax regime to the benefit of investors. Schedule 19 was a complex and confusing area of taxation and its abolition will have a small and welcome benefit on the domestic funds industry.
On the bank levy increase versus the corporation tax cut: "It sounds like the bank levy increases two years before the corporation tax cut in 2015 that it is meant to match."
Paul Aitken, chief executive of personal asset lender Borro
The Chancellor’s promise today to look at whether the Funding for Lending scheme can be extended is just not enough. Businesses have waited and waited for more decisive action and it looks like they’ll be waiting even longer. Hot air from the Chancellor does not put pounds into the bank accounts of the nation’s small businesses.
While we of course welcome the Government’s numerous promises to breathe life into the UKs business sector and support the nation’s entrepreneurs, we need to see it walk the walk and not just talk the talk. There have already been moves made to stimulate business growth, through various initiatives over the past year, including the Funding for Lending initiative of course, but this is yet to have a truly positive effect. As a result, millions of small businesses still have no confidence in the banks and have turned to non-bank financing.
We need to see confidence boosted, which in turn will lead to business owners seizing opportunities, resulting in the stimulation of growth. Our online personal asset-lending model has thrived since borro was set up five years ago. We have seen a huge increase in the number of small business owners unlocking finance from valuable and unusual personal assets in order to capitalise on business opportunities; the average loan value to SMEs, who currently represent over 60% of our client base, rose 41 per cent last year, from £17,000 to £24,000.
David McCorquodale, head of retail at KPMG
Retailers wanted measures that put more money in consumers’ pockets, and reduced the costs on their balance sheets. Today’s Budget has touched on the first, but completely failed to achieve the second.
Jeremy Warner, Telegraph Assistant Editor
It's not going to get any better for savers judging by signalled changes in Bank of England remit. Interest rates to remain low forever.
Simon Nixon, Wall Street Journal
The problem with Osborne's planb to inflate away UK debt is that it only works if wages rise too. No sign of this happening.
[Scrapping the planned fuel duty hike] is fantastic news for businesses that rely on the roads to function and operate. A fuel duty hike would have had a severely negative impact on the haulage industry and a potential loss of jobs right down the ladder the knock-on effect would have been unthinkable. Scrapping the fuel duty hike doesn’t weaken Treasury tax receipts as the previous above-inflation increases in duty and higher VAT have compensated for that. For me there is no argument scrapping the fuel duty had to happen and I’m delighted that it has. At last we, and our peers, have some respite. This has now ensured that our industry, and other businesses that function on the roads, can now get on with business as usual and get Britain moving.
Gerard Lyons, economist
The disappointment is that it sounds like business rates tax is not being cut - that is an important tax for small firrms.
Chancellor seems to have made MPC remit even more complex. Seems even more likely that we will continue to miss inflation target in future.