When Shadow Chancellor John McDonnell came to the dispatch box to reply to the Chancellor George Osborne’s Autumn Statement, I felt sorry for him. All his planned rhetorical ammunition – most obviously critiques of the cuts to tax credits and spending on the police – were dud. Osborne’s politically astute U-turns left McDonnell with little say, perhaps going some way to explaining his cringing quote from Chairman Mao.
Entrepreneurs and business owners in general can breathe easy. Before the Chancellor stood up there were fears that Entrepreneurs’ Relief – which reduces the capital gains tax levy from 28% to 10% on disposals up to a lifetime limit of £10m for selling their business – would be cut. There were also concerns that the Chancellor would try to force contractors and consultants onto payrolls if they work with a company for over a month. And some worried that Osborne would tinker with business property relief (BPR), which allows people who inherit the family business not to pay inheritance tax. None of these rumours, it turns out, were credible.
Instead, bolstered by an unexpected fillip of £27 billion in the underlying forecast, the Chancellor announced a hoard of new spending commitments. Some of which will land at the feet of entrepreneurs. For example, £400 million will be used set up an investment fund “to help small businesses to grow” as part of Osborne’s flagship Northern Powerhouse initiative. But the best announcements don’t involve spending more.
The most positive news is the Chancellor’s announcement that by the end of the Parliament local government will retain 100% of business rate revenues, giving them control of £13 billion of additional local tax revenues, and £26 billion in total business rate revenues. This will stimulate competition between councils and encourage local government to be more responsive to business needs. However, business leaders will need to be better engaged with local government to ensure councils are fiscally responsible. For example, city-wide mayors will be given the power to levy a business rates premium for local infrastructure projects, and as such businesses will need to make sure their views are properly voiced through their Local Enterprise Partnership.
It’s no secret that the UK government has devoted extra effort to building its relations with China. As part of this, the government has announced the trial of a 2-year visa for Chinese visitors from January 2016, with plans to extend this to a 10-year visa. Let's hope this is the first of further liberalizations of a visa regime that’s increasingly unfit for entrepreneurs seeking the talent to build their business.
The Autumn Statement also announced that the Department for Environment, Food & Rural Affairs (Defra) will open up 8,000 datasets over the next year to enable citizens and businesses to make better use of data to protect the environment and drive innovation in food and farming. When the government opened up transport data, innovative companies like CityMapper were created.
The Government is also looking at how to change the rules to Business Investment Relief to increase investment in UK businesses and simplify employee share schemes.
All in all, it’s a perfectly respectable Autumn Statement. Perhaps finding £27 billion down the back of the sofa helped ensure the worst of the rumoured policies were not needed.
