Chancellor Rachel Reeves has pledged that she will stick to one major fiscal event a year with no major tax announcements in the Spring Forecast Statement. However, events may well overtake her and the wider economic and public finance situation demand prompt action.
Neither public spending plans nor the UK’s economic growth are where the government is aiming for them to be. Here we look at how Ms Reeves may address those issues on 3 March.
Cunning plan
Mark Morton, tax expert at Mercia, says: ‘It will be an interesting Spring Forecast, the Chancellor’s second one. We will see what cunning plan there is to stimulate the economy because at the moment growth does not seem to be happening and there does not seem to be a big prospect of it happening.’
£11 billion SME package
One recent announcement from the government as it tries to stimulate economic growth saw five major UK banks agree an £11 billion lending package aimed at SMEs to support small business growth.
The lending commitment is one of the largest collective moves by the banking sector in over a decade. The government says this represents an ‘historic show of confidence in the UK economy’ and hopes it will help firms invest, hire and expand.
Morton says: ‘What’s interesting about that is they’re raising taxation from SMEs but then to help them we will help them to borrow more.’
Big dent
He continues: ‘The government are saying to SMEs, we’ve increased your taxation package tremendously with National Minimum Wage increases and with National Insurance increases. The changes to salary sacrifice will make a really big National Insurance dent in the pockets of bigger businesses in 2029.
‘On the flipside, we’ll allow you to borrow more. Now, as a prudent business with uncertainty in the world you may not want to borrow more.
‘My feeling is that businesses are currently not looking to hire new people or even replace those who leave. They’re cutting their cloth accordingly, particularly those bigger firms who are now looking forward to 2029 and another big hit with National Insurance coming again so we will plan for that now.’
Relief for pubs
Another recent government announcement saw pubs and music venues in England given a 15% discount on their business rates bills from April and will not see increases for two years.
It came after a backlash against November's Budget, which left many facing major increases in their business rates bills as Covid-era support was withdrawn from the hospitality industry.
Morton says: ‘There will be some support from business rate bills for pubs but not for anybody else. The hospitality sector is somewhat broader so there are significant increases in business rates for hotels, for example. These increases will hurt businesses, so they have to pass them onto customers or shut down.
‘There has been a concession for pubs and that begs the question from others – what are you going to do for my business? It feels a bit like the saga with farmers and Agricultural Property Relief (APR). If you shout loud enough, bang the drum long enough then concessions will be made.’
‘It will be interesting to see how this develops over time as I suspect it is not the end of that particular saga. It’s a fast-moving story.’
This Spring
The saga will conclude with the Spring Forecast Statement on 3 March.
Whatever the Spring Forecast Statement brings, Mercia’s tax experts will be watching and will provide detailed analysis of the government’s fiscal announcements. Keep your clients up to date with our range of digital products.