Three changes the Chancellor needs to make in the Autumn Budget 2017.
Philip Hammond needs to take the bull by the horns in the Autumn Budget and introduce measures that will positively impact the UK economy.
The Chancellor has little wriggle room in the upcoming Budget as a stagnating economy is working against him. Recent reports indicate that the Office for Budget Responsibility (OBR) have wiped out nearly two thirds of Hammond’s £26bn Budget war chest as UK growth is downgraded. Seven years of austerity and public spending cuts mean there is very little fat to trim in the public purse for giveaways.
There are three key measures Hammond could introduce that would have an immediate positive effect: policies to encourage the opportunities around scale-ups; begin delivering meaningful investment in core UK industries; and revamp the entire concept of the Budget.
Scrap the Budget entirely
The pomp and ceremony paid to the Budget has grown exponentially in the past decade. Minor amendments have taken on far greater magnitude with major changes being ignored. Philip Hammond took the step to reduce the number of Budgets per year, from two to one in the spring of 2016, in an attempt to bring more certainty to the tax system.
Do we even need an annual Budget? It is increasingly a political spectacle. The problem with an annual event is that small changes end up getting overinflated and major aspects are often missed. Adding one penny to the price of beer often overshadows a multi-billion pound infrastructure investment.
The Budget puts undue strain on everyone for a short period of time. If measures were introduced gradually throughout the year then there could be more reasoned discussion and perhaps a longer term focus. The Chancellor should look to provide more regular updates. In a world of real time information and continual updates should individuals and businesses be forced to rely on an archaic concept? Government is keen to promote real time recording so why should we expect any less from them?
Scale-up for the future
Research has indicated that by closing the scale-up gap there is potential to deliver up to 150,000 new jobs across the UK and as much as £225bn toward UK GDP, both by 2034. Importantly, this growth is across the country and not just confined to London and the big cities.
There are so many ‘quick-wins’ in the context of fast growth businesses. Simple alterations to the tax system, which will be relatively cost neutral, could benefit those companies greatly.
Scale-up businesses are vital to our economy but the complexity of the tax system makes it near impossible for companies to use the very advantages which are there for their benefit. For example, we continually hear how many companies are struggling with R&D tax credits or patent box claims. The government should be taking steps to make it easier for people to claim, reducing the complexity and speeding up the process.
The Growth Support Service, a service designed to assist small and mid-sized businesses, was launched at the start of autumn but actually finding concrete detail on the platform is very hard. Hammond should look to invest, a comparatively small amount of money, in amalgamating all the detail for the services offered to scale-ups in one centralised location. Scale-ups would benefit dramatically from being able to turn to a single repository of information.
Massive infrastructure investment will sow seeds of growth for years
The expansion of Heathrow/Gatwick, building of Crossrail 2, the development of Hinckley Point and the planned HS2 are all massive, government-backed, initiatives that have been discussed for years but are still yet to get the full go-ahead.
The Chancellor needs to make a decision as to where funding is going to go and then press the issue. People can then plan appropriately. If Britain is going to remain a central player in the global marketplace the questions shouldn’t be ‘which airport gets the next runway?’ but rather ‘how many runways do we need to build to ensure Britain remains a global nexus?’
Outside of the big projects, Philip Hammond should identify, and then invest in, the areas of the UK economy where we are truly world beaters: financial services, education, pharmaceutical, precision engineering etc. If we want Brexit to be a success we need to promote the areas the rest of the world truly relies on us for.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on www.smithandwilliamson.com prior to the launch of Evelyn Partners.