As I watched Jeremy Hunt delivering his Autumn Statement today I was reflecting on what it is that we want to see in a UK Chancellor.
I must admit that I had never really given this much thought before, perhaps because all previous Chancellors until September this year had been exactly what we expect them to be – safe, dependable, reliable, unflashy. Mr Hunt’s esteemed predecessor could not be accused of being any of those things, so I was very much hoping for a return to the status quo. Thankfully, that was what we got – in spades.
This could not be considered to be an exciting Budget, but I say thank goodness for that because we’ve had quite enough political and economic excitement this year.
Not just we in the UK, but the whole world, to a greater or lesser extent, relies on a stable UK economy. I think we are perhaps still viewed by the rest of the world as having the greatest claim on the word ‘sensible’, particularly where economics are concerned. But our immediate past Prime Minister and Chancellor had a very good go at throwing that out of the window.
So I wanted unexciting and that’s exactly what I got! Of course, there was bad news to be delivered both in the form of tax rises and budget cuts, but there was nothing unexpected or radical that might spook the financial markets. Tax rises were generally stealthy or focused on those who could afford it most, whilst the cuts were aimed at areas the UK public is seemingly least bothered about.
There were the anticipated freezes in allowances and bandings, impacting on income tax, national insurance, inheritance tax and VAT, as well as cuts to exemptions for dividend income and capital gains, but no changes in rates or other detail, which is welcome. Business abhors uncertainty, so too much tinkering will deter entrepreneurship and inward investment, both of which we need to strengthen the UK economy.
There was one interesting piece of detail within the Budget and that was relating to R&D tax credits. This is an area the Government has been trying to tighten up on in recent times because it has become a rich source of spurious claims, promoting a mushrooming of ambulance chaser type ‘advisers’ moving into this space.
The qualifying expenditure uplift under the SME scheme, that has been at 130% for many years, was reduced to 86% (a one third reduction) and the associated repayable tax credit has been reduced from 14.5% to 10%, whilst at the same time the tax credit given to large companies under the RDEC scheme is being increased from 13% to 20%.
There is clearly a significant refocusing of this relief on larger companies that are represented by professionally qualified advisers. I, for one, hope this has the desired effect of targeting this relief where it is really due and that it eradicates the criminal activity in this area.
Going back to my overriding reaction, to use a sailing analogy, it seems someone has a steady hand on the tiller again, so we can plot a confident path forwards and concentrate on our own businesses instead of worrying whether anyone is in control!