Leading industry figures have responded favourably to the Chancellor George Osborne’s Autumn Statement but raised concerns over the impact of a new Apprenticeship Levy.
Osborne named key initiatives affecting business, including a £61bn investment in transport infrastructure, business rate devolution to local councils and an Apprenticeship Levy on businesses to pay for a target of £3 million apprenticeships by 2020.
Mike Holling, executive director of the Craft Bakers’ Association, expressed disappointment Osborne had not addressed the sugar controversy but said: “The Craft Bakers’ Association cautiously welcomes some of the items in the Chancellor’s Autumn Statement.”
John Allan, national chairman for the Federation of Small Businesses (FSB), added: “Given the tight constraints that the Chancellor was working to, small businesses will be pleased that he has listened to their concerns. Mr Osborne has managed to fund areas that drive productivity and long-term economic growth, such as skills and the science and innovation base.”
Carolyn Fairbairn, director-general of the Confederation of British Industry (CBI), was more positive.
She said: “Businesses will be pleased to see the Chancellor staying the course on deficit reduction, his commitment to an industrial strategy and the emphasis on nurturing a vibrant business community.”
Apprentices
Osborne’s announcements of the Apprenticeship Levy, which taxes companies with paybills of £3m or over, caused some concern.
Fairbairn said: “The Apprenticeship Levy, set at 0.5%, is a significant extra payroll tax on business and, by widening the net, it will now catch a greater number of smaller firms.”
She added: “With the levy set at 0.5%, even those businesses most committed to training and development won’t be able to recoup their outlay and it looks like an additional payroll tax.”
The Food and Drink Federation agreed. While keen to see apprenticeship numbers grow, it said: “Reform is needed to make this route more attractive and an apprenticeship levy system that is proportionate, simple and works for businesses of all sizes will be a key ingredient in achieving this.
“The rate announced today will be a cause of concern for larger businesses, and may hit company investment pots for staff training and, perversely, new apprenticeship starts.”
Allan was more positive, saying: “The FSB supports the decision to use payroll as a measure to determine which businesses pay the Apprenticeship Levy, as opposed to headcount. The 0.5% payroll levy on firms alongside a £15,000 allowance will mean that the levy will only apply to firms whose total payroll exceeds £3 million. We believe this is a fair level as it recognises that not all businesses will be able to afford to pay the charge.”
Holling raised concerns about the quality of the apprenticeships, saying: “We are very interested to learn about the Apprenticeship Levy, but we will wait for further information to be published. I think the most important thing is that the training has to be of a high-quality standard. The Craft Bakers’ Association is working hard with the Trailblazer 3 project and is engaged in setting the standards of the apprenticeship in craft baking.”
Business rates
The news that business rates would be devolved to local authorities was greeted cautiously, with Holling saying: “It was encouraging news about the business rates, but we shall wait and see what happens in the future. We will be interested to see how this works when devolved to local authorities.”
However, for Fairbairn and Allan, more important than devolution was the extension of the Small Business Rate Relief for another year to April 2017.
Allan said: “Small firms face a challenging start to 2016 and the FSB welcomes the Chancellor’s commitment to small firms by extending the temporary doubling of Small Business Rate Relief to April 2017.
“Over 600,000 small and micro enterprises depend heavily on this relief. Many are still struggling to adjust to challenges around the National Living Wage, changes to dividends on tax and pensions auto-enrolment. Its removal would have been an additional tax rise.”
Fairbairn lamented the delay of long-term reform. She said: “It’s disappointing to see the promised response to the Structural Review of Business Rates pushed back to the 2016 Budget. The current system is based on a decades-old model that no longer reflects economic conditions, so alleviating the burden cannot come soon enough.
“While extending the small business rate relief scheme for another year is positive news, business wants to see concrete steps taken to make the system simpler, fairer and more competitive to tackle the cumulative burden upon firms.”
Infrastructure
Investment in transport infrastructure received raised universal acclaim from both Fairbairn and Allan.
Fairbairn said: “It’s good that the government has increased capital spending and remains committed to road and rail investments, including the Trans-Pennine railway. Businesses will want to see promised projects breaking ground as early as possible in this Parliament to maintain momentum.”
Allan added: “We welcome the significant and much-needed increase in investment in transport infrastructure, allowing our road and rail network to help provide an environment to support economic growth and rebalance the economy.
“The commitment to start building HS2 early on in the Parliament is a welcome statement of ambition. We now look forward to seeing such an unequivocal statement about expanding airport capacity in the south east.”
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