Measures announced by Chancellor Rishi Sunak in the Government’s Spring Statement have been welcomed by the CEO of Liverpool-based Redwigwam. Lorna Davidson said: “Several of the measures announced demonstrate that he has listened to the concerns of businesses and workers and recognises the additional pressures caused by the Ukraine situation.
“I welcome the announcements regarding the cut in the basic rate of income tax to 19p in the pound and the equalising of the thresholds for National Insurance and income tax,” Davidson remarked. “I was also pleased to hear about the cut in fuel duty by 5p a litre until March next year, although I’m worried this doesn’t go far enough.
“The vast majority of my staff and Rediwigwam’s workers are driving to work and around the country, so the current high costs of fuel are a big concern for them,” she noted. “Workers are really feeling it where it hurts most and that’s in their pockets.”
David Hedges, partner and head of employment taxes at accountancy and business advisors Azets commented: “The Chancellor has stated the Employee National Insurance starting threshold will rise to £12,570 from July 2022 with no employee NI paid below that sum. This helps employees but there was no mention on the employer threshold. However, the Employment Allowance for employers will rise by £1,000 to £5,000. The eligibility for Employment Allowance is where an employer’s NIC liability is less than £100K in the previous tax year. This will be a helpful easement for small employers which goes some way to mitigate the fact that there is no change in the Employer National Insurance threshold and which the Chancellor estimated will benefit around half a million SMEs.
Hedges said he welcomed the planned discussions on reliefs such as training, qualifications and R&D tax credits, but for SMEs, these measures in combination as well as the temporary cut in fuel duty are unlikely to fully mitigate the inflationary impact of the Health and Social Care levy from April 2022. “This means there will be more pressure on SMEs from their employees to increase wages to offset the effects of increased inflation – which is predicted to rise to eight per cent this year – in order to retain valued staff.”
The tax cuts outlined for 2024 were also positive, said Hedges but since SME employees are already struggling with rising living costs the support may come too late.
“The Chancellor rightfully acknowledged that talent is the backbone of the economy,” said Ged Mason OBE, Morson Group CEO, “and whilst it’s disappointing to hear of the confirmed hike in National Insurance Contributions that directly impacts a business’s bottom line, the one per cent reduction in the lowest rate of income tax was a positive boost for millions of workers.
“We’re currently experiencing a hiring boom, and there are further plans to mobilise 500,000 job seekers into work by the summer,” said Mason. “For the last two years, the recruitment industry has had to think innovatively about redeploying workers into sectors experiencing the most demand for resource; but today, recovery is universal, and facilitating people that are out of work back into the economy is a positive step forward to meet the inevitable talent drains that will arise as industries continue scaling back up. However, more needs to be done to ensure those entering specialist sectors for the first time, or who are retraining in new career paths, are given the support and training required.”
Mason added that the Ukraine conflict and the cost of living crisis has shone a light on the UK’s need to be more self-sufficient in terms of energy, and though it wasn’t directly mentioned in the Chancellor’s statement, the government would soon be setting out its energy security plan, which will rubber stamp investment to scale up hydrocarbon, nuclear and renewable energy generation. “This is what this country needs today,” he said, “and we’re well versed in these core markets to support ongoing skills demands, be it niche and volume labour requirements.”
Mason argues that businesses working in these markets need immediate support to ensure the next generation is engaged with the type of work being undertaken. Without that, the country’s energy ambitions may never materialise to their full potential. “It was reassuring to hear the Chancellor say that he is about to embark on a consultation of the apprenticeship levy, its effectiveness and whether it is incentivising organisations to invest in the right kinds of training, all whilst ensuring the UK taxation system works to support future pipelines of talent,” said Mason.
