Ahead of what could be the last major economic update before the general election, the region’s business leaders told BETHANY WALES what they want to see in next week’s spring budget.
Jeremy Hunt's budget next Wednesday is likely to be the last opportunity for the government to make an impact on voter's finances before the general election.
Last year’s autumn statement already outlined several changes set to come into force in 2024, including cuts to national insurance, rises to the minimum and living wage, and a pledge to keep the state pension triple-lock.
Although nothing is certain until the day, the rumour mill is ablaze with speculation about what the chancellor’s plan for the UK economy will include.
There had been hopes that the budget would be used to slash income tax rates, with previous news reports suggesting we might see cuts of up to two pence.
But following the news that the economy has entered a recession, experts suggest these plans may have been shelved, along with any intentions to reform inheritance tax.
Other possible tax changes could include a cut in the rate of VAT on energy-saving materials supplied by builders, and bringing the VAT on electricity for electric cars supplied at public charging stations in line with the lower rate that applies if you charge your electric vehicle at home.
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The chancellor could also reintroduce tax-free shopping for tourists, which might encourage more overseas visitors to visit the UK.
And while Spring Budgets rarely feature major policy shifts, the upcoming general election might incentivise the chancellor to make some bold moves to get voters onside.
With that in mind, here’s what business leaders in East Anglia will be hoping for.
VAT REFORM
VAT is at the forefront of many business owner’s minds.
For Lauren Miller, co-owner of Genesis hair salon in Cromer, the threshold at which businesses start paying it is having a devastating impact.
In the 2022 Autumn Statement, the government announced that the VAT threshold would remain frozen at £85,000 until 2026.
It has been at that level since 2017, despite soaring inflation.
Ms Miller said: “£85,000 doesn’t mean the same now as it did six years ago.
“We’ve had to put our prices up to account for rising energy costs, and so we find ourselves approaching that higher turnover much quicker, despite the fact we’re making less profit.
“There’s also no consideration given to the fact that we’re co-owners, so our individual income threshold is half of what it would be if there was just one of us.”
Both Ms Miller and her business partner have had to take huge pay cuts to afford their VAT bill, which, with the cost of living so high, she said was making life “challenging”.
She added: “The government needs to look at VAT, because the current system punishes businesses for growing.
“How can that make sense for the economy?”
Those in the tourism and hospitality industry are also hoping the chancellor will look at VAT.
In July 2020, the then chancellor announced a temporary 5pc rate on most tourist and hospitality-related activities, reinstating the normal 12.5pc rate in March 2022.
Mike Scott, the managing director at Potters Resorts, is backing nationwide calls for the chancellor to once again reduce the rate of VAT for the sector.
He said: “If the government were to reconsider the VAT rates for the hospitality industry, aiming for a more sustainable reduction, it could play a decisive role in ensuring the survival and thriving of the sector.
“A fairer VAT rate would help level the playing field and act as a crucial support structure for businesses grappling with rising operational costs in the aftermath of the cost of living crisis.
“My concern is that without such interventions, we risk losing the fabric of our beloved pubs, restaurants, and holiday destinations.
“Such a loss would not only diminish the cultural and social richness of our communities but also undermine the potential for a post cost of living crisis boom in domestic tourism.
“As we emerge from the current economic challenges, this would ensure that the UK remains a vibrant, attractive destination for both domestic and international visitors.”
DISPOSABLE INCOME
For businesses across the spectrum, increasing the change in people's pockets is a key concern.
Rob Bradley, centre manager at Castle Quarter in Norwich, said any measures that helped customers would help the business.
He said: “I would like to see the chancellor making meaningful cuts to income tax and national insurance so that working people have more disposable income to spend on family activities, eating out and retail therapy.
“At the moment, we are seeing many of our customers – even those in full-time employment - having to make extremely hard financial choices.
“Sadly, the gap between those who are ‘comfortable’ and those who are struggling is very wide.”
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And with the east of England seeing the highest percentage increase in rateable value - which is used to calculate business rates - in the country since 2017, Mr Bradley added that a reduction in business rates would help struggling retailers.
Rebecca Bird, centre manager for the Buttermarket Centre in Ipswich, agreed.
She said: “Dealing with sky-high business rates is undoubtedly the hardest aspect of running a centre right now.
“It’s not just what we’re paying, but also the pressure it puts on our tenants.
“Business rates account for about a third of their total costs being in the centre.”
INVEST IN GROWTH
After several years of operating in survival mode, there’s hope the government will take measures to help businesses grow.
In the Spring Budget last year, Mr Hunt announced three years of full expensing for plant and machinery – meaning a business can reduce its taxable profit by the full cost of any qualifying investment until the end of March 2026.
A 50pc deduction is also allowed for some assets including solar panels.
Although the move was praised by many big businesses, it was widely criticised by the SME community for only being relevant to the 1pc of companies with capital expenditure in excess of the annual investment allowance of £1m.
Nigel Connor, director of Hethersett-based Sharper Accountants, said he wants to see the government empower business owners to take things to the next level.
He said: “Improved growth benefits the whole country, but beyond aspirational statements from the government, there have been no significant measures aimed at promoting higher growth rates for the majority of the private sector - small and medium sized businesses.
“I would like to see an increased focus on growth initiatives and tax incentives aimed at helping small businesses. I think that this should be a cornerstone of the upcoming and any future budgets.”
Rob Davies, managing director of One On One Communications, agreed.
He said smaller businesses consistently miss out on funding due to the terms and conditions of grants which stipulate firms must be a certain size to be eligible.
He said: “The fixed costs of running an office and a business are disproportionately high for a business employing less than five people but they are the acorns from which larger companies develop so more encouragement should be given to them to start up and carry on.
“For example, often the only way for smaller businesses to rent offices is for grant funding to be made available.
“But businesses like mine are usually deemed too small for grant funding.”
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