Watching Jeremy Hunt’s latest performance today, I couldn’t help but think back to the economic madness we were experiencing this time last year. In some ways it seems impossible to believe that it was only one year ago and in other ways, difficult to comprehend that it ever happened at all.
This still leads me to a profound sense of relief that we have grown-ups in key positions of political power now, but overall, I was left with a distinct impression today that I had been subjected to an actor’s performance, as opposed to hearing a plan for the country’s recovery from its current parlous economic state (damning with faint praise is I think the expression!).
We all know that there is going to be a general election in 2024 and we equally know that current polls suggest a reasonably comfortable win for the opposition. As such, this fiscal event was always going to be dominated by shameless attempts to win over voters in the middle ground, and sure enough, that’s exactly what we received.
First, there was the usual charade of trying to blind us with statistics to attempt to claim, contrary to economic reports of the last 12 months, that the UK economy was actually performing quite well, especially compared to other large European countries. Whilst Mr Hunt gave an impressive performance, I know for a fact that he was cherry picking a handful of economic indicators that just happen to have been going in the right direction recently and also flexing the truth a little with the presentation of others. In reality, there have been many economic articles written since Covid trying to analyse the whys and wherefores behind the UK’s sluggish recovery when compared to our fellow G7 members.
Next, we had what was trailed as “the biggest business tax cut in modern British history”, this being the Chancellor making full expensing of certain fixed asset investments a permanent move, as opposed to just a 3 year measure that would have expired in March 2026. Firstly, this was only ever significant to a small number of large companies; and secondly, the current government was not likely to be in power when the original temporary legislation expired, so this can only be seen as a crude attempt to make life more difficult for the ensuing government. There was some name dropping surrounding the introduction of this measure to make it appear that government is listening to well respected businesses and it’s true that this should remove a potential barrier to investment, but the real-world beneficial impact of this measure is questionable.
Finally, we had the rabbit out of the hat moment that every Chancellor likes to produce towards the end of their performance. Today, it was the announcement of a 2% cut to employee’s national insurance, effective from 6thJanuary 2024 (a busy December for payroll software developers!), together with measures with a similar impact for the self-employed. There was also a commitment to honour the triple lock mechanism for the state pension, with pensions rising by 8.5% with effect from next April. These measures combined mean that the vast majority of adults in the country will be enjoying a little more money in their pockets (or should I say Apple/Google wallets) in 2024. Pretty much the only groups not to benefit are wealthy pensioners and company owner/directors, both of whom’s votes the government will feel are largely in the bag already.
So, as anticipated, this was a highly political, short term fiscal event where little attempt was made to solve the country’s mid to long term issues.
By the way, in amongst all the vote grabbing measures, the predicted harmonisation of the small and large company R&D tax credits regimes was indeed announced, so this will come into effect in respect of accounting periods commencing after 31 March 2024. That was something to at least keep the tax planner within me interested!