Comment from Chamber: Autumn Statement and Comprehensive Spending Review

Christian Spence, Research Manager at Greater Manchester Chamber of Commerce

Commenting on today’s Autumn Statement and Comprehensive Spending Review, Christian Spence, Head of Research & Policy at Greater Manchester Chamber of Commerce, said: “The Chancellor’s delivery of the Autumn Statement and Comprehensive Spending Review contained much of the political bravado that we have come to expect from him. His near-wholesale U-turn on changes to tax credits and his abandoning of any cuts to the police service were no doubt highly political gestures, but both will be welcomed.

“Revised forecasts from the Office of Budget Responsibility gave the Chancellor an extra £27bn from better than expected tax revenues and lower than expected debt interest payments; this has allowed him to introduce some big changes, but tax and interest forecasts can change quickly, and these should be watched carefully over the coming years.

“Smaller businesses will be pleased with the extension of the doubling of Small Business Rate Relief, but the postponement of any announcement on the wholesale review of business rates until Budget 2016 is disappointing; however, if waiting a few more months delivers fundamental reform, it is a price worth paying. We will be continuing to work closely with government until then on what that reform should look like.

“Larger businesses will be hit be a £3bn additional tax in the form of an apprenticeship levy. This can only be successful if the mechanism that allows SMEs to access this pot is radically simpler than the current provision, but the establishment of a business-led Institute for Apprenticeships will at least allow employers to engage in the design and quality of future schemes. The extension of further education loans to 19-23-year-olds for level three and four qualifications is a positive step, and for level five and six qualifications to all those over aged 19 also. However, set against continued cuts to the adult skills budgets, the outcome of these two measures is not yet known, and access to skills to retrain and reskill employees may yet remain difficult.

“In Greater Manchester, businesses may yet have to pay an additional 2p in their business rates, levied by the forthcoming elected mayor, to pay for housing and infrastructure. Our members support this proposal, but only on the condition that they have a direct vote on the measures being proposed: the Local Enterprise Partnership plays an important role in strategic vision-setting, but it is simply not true to say that it is in any way representative of the private sector in Greater Manchester and it must not be given powers to levy taxes on businesses without their agreement. Extended devolution powers for the mayor of Greater Manchester also allow for the introduction of a community infrastructure levy: businesses will tolerate some additional taxation for clear and tangible benefits to their area, but care must be taken not to see the industry base of our city region become an easy cash cow to fix large-scale capital programmes that should be funded out of core central finances.

“Residents in Greater Manchester, too, will see additional taxes, with a 2% levy on council tax for social care contributions and a further 2% levy for police spending. Changes to local government finances over the coming parliament will be complex, with 100% business rates retention, the abolition of core central government grants and the ability for local authorities to keep 100% of receipts of any asset sales. Whilst Osborne states that local government budgets will be the same in cash terms at the end of the parliament overall, spending on them from Whitehall will fall by 1.7% per year, and it’s not clear how there may be variations across the country: there may yet be big winners and losers.

“Investment into HMRC to deliver fully digital tax accounts for all businesses and individuals will bring some welcome relief in terms of administration, but we remain concerned at the rationalisation of HMRC and complaints from businesses about the organisation remain high. With low satisfaction at getting problems resolved, a digital offer may not solve all of these issues.

“UKTI will be refocused to provide world-class export and investment promotions with a £24m investment, joining up the organisation digitally, but its revenue budget will still fall by £22m over the parliament. The government has retained its overly-ambitious target of £1tn of exports by 2020 which it is guaranteed to miss, particularly with no additional support for the critical SME market who still find support, both practical and financial, far too difficult to access. £22m invested into Northern Powerhouse trade missions may help, but the smallest firms need practical, on-the-ground help and advice, and it is this that is hard to come by.

“Additional spending on infrastructure of £12bn over the parliament will support the delivery of HS2, trans-Pennine electrification and investment into Rail North to support the development of HS3, as well as large-scale road investment and road repair, an issue complained about for many years. Other spending on smart ticketing for the north is certainly welcome as we lag nearly a decade behind London on this technology. A broadband investment fund is also welcome, but government rhetoric and spend has been high in this area for many years: what we must see is delivery.

“The raft of announcements on housing, from right to buy from associations, help to buy in London and stamp duty changes has the potential to cause a raft of perverse consequences. Government policy in this area is confused at best and outright damaging at worst, with many measure here that will drive demand and increase prices in the short-term.

“Manchester received some additional direct spending with a commitment to funding a south-Asia gallery at Manchester Museum and in the Museum of Science of Industry as well as additional support to the centre of excellence in nuclear science.

“In summary, we have a mixed bag. Some complex announcements whose effect will not be known for some time, with some sensible investments in infrastructure. All in all this was a highly political speech with lots of policy development. It may yet all work, but policy is hard to predict.”