26 November 2015

Autumn statement brings some positive news but apprenticeship levy will add to costs for many firms

Against a backcloth of hefty cuts to the budgets of several Departments of State, the latest joint spending review and autumn statement* offers some positive news. With the latest OBR growth forecasts providing the Chancellor with more room for manoeuvre, some of the worst case scenarios predicted previously failed to materialise. Encouragingly, the statement emphasises the Government’s focus on longer-term investment in the economy, reducing the deficit and returning to a trade surplus by 2020, and continuing the “active and sustained industrial strategy” launched in the last Parliament. 

Less welcome though is the Chancellor’s announcement that the new Apprenticeship Levy, effective from April 2017, is to be set at 0.5% of paybills. Although every employer will receive a £15,000 allowance to offset against the levy, this will still be a significant extra payroll tax on businesses with paybills of more than £3m. It will be essential to ensure that employers control any funds raised by the levy and that the money is used to support high quality employer-led apprentice training, whilst minimising bureaucracy and administrative costs for both employers and front line training delivery organisations.

On business rates, we are pleased that the small business rate relief scheme is to be extended for another year, although the long-overdue and much-needed review of business rates will not happen until next year’s Budget. Alongside this, we are promised new measures on business rate devolution, with local councils given the power to cut rates and ‘make their area more attractive to business’ and elected mayors able to raise rates if these are used to fund specific infrastructure projects supported by the local business community. These measures may prove beneficial, provided they lead to a more stable and predictable local tax environment that supports the growth of local businesses.  

Given that the majority of printed products are distributed by road, the announcement that transport capital spending will increase by 50% to a total of £61 billion, funding the largest road investment programme since the 1970s, is good news, as too is the confirmation that the science budget is to be protected in real terms. However it is of some concern that the move to replace grants with loans from Innovate UK could hold back innovation, particularly in smaller firms. 

Moving to an exemption, rather than compensation, from the costs of renewables for energy-intensive sectors will be helpful to the industry’s key suppliers, while the Chancellor’s announcement that the Funding for Lending Scheme is to be extended for another year - enabling business to access less expensive finance for investment - is also welcome. 

*You can download the full text of the Chancellor’s Statement here