TSA Comments on Budget 2017
Commenting on the 2017 Budget, Dr Philip Wright, Chief Executive of the Textile Services Association said:
“Increasing the National Living Wage should be viewed with caution. We support a better paid and trained workforce, but in today’s uncertain climate the increase will squeeze the NHS even more. This is a safety matter – hospitals rely on our members to decontaminate 13 million bedsheets and scrubs every week – without such services they cannot operate.
“With a weak pound increasing import prices for machinery, linen and cleaning chemicals, a wage increase significantly above inflation heaps yet more costs on our members who in turn have no choice but to pass this on to health, hospitality and manufacturing sectors”.
The Low Pay Commission has recommended that:
- The National Living Wage (for workers aged 25 and over) should increase from £7.50 to £7.83;
- The rate for 21-24 year olds should increase from £7.05 to £7.38;
- The rate for 18-20 year olds should increase from £5.60 to £5.90;
- The rate for 16-17 year olds should increase from £4.05 to £4.20; and
- The apprentice rate (for apprentices aged under 19 or in the first year of their apprenticeship) should increase from £3.50 to £3.70.
- The Low Pay Commission has recommended that the accommodation offset increases from the current £6.40 to £7.00 from 1 April 2018
Full Analysis from TSA
As you know, the Chancellor has presented the 2017 Autumn Budget to Parliament, marking the first Autumn Budget since the move to a single major fiscal event each year. The focus of the speech was on building a Britain “fit for the future” and talk of a “technological revolution” mirrored investment announcements in technology, R&D and infrastructure.
In addition to tax and spending commitments, detailed below, the Chancellor also announced that growth forecasts from the Office for Budget Responsibility (OBR) – including productivity, business investment and GDP growth – have all been revised down. However, the OBR confirmed the UK remains on track to meet its fiscal rules.
Particularly relevant to TSA members, the Chancellor announced:
- National Living Wage – Increasing National Living Wage by 4.4% from April, from £7.50 an hour to £7.83
- National Minimum Wage – Accept the Low Pay Commission’s recommendations on National Minimum Wage rates to increase them by about 4% per band from April 2018
- Employment practices – Publish an employment status discussion paper as part of the response to Matthew Taylor’s review of employment practices in the modern economy
- Brexit preparations – an extra £3billion is being set aside for Brexit preparations over the next two years in addition to the £700million already invested
- Government planning – The UK is working “to achieve a deep and special partnership” with the EU and the Government will ensure the country is ready for every possible outcome following negotiations
- Apprenticeship levy – Continually review how the apprenticeship levy can be spent so that it works effectively and in a flexible manner for industry
- Plastic Tax – Launch a call for evidence in 2018 seeking views on how the tax system or changes could reduce the amount of single-use plastics waste
- Support of low carbon energy - Support low carbon electricity through up to £557 million for further Contracts for Difference and not introducing levies until the burden of such costs are falling. Current forecasts would put this in 2025
- Climate Change Levy (CCL) – Set CCL main rates for the years 2020-21 and 2021‑22 at Budget 2018. In addition, freeze the CCL main rate for LPG at the 2019-20 level until April 2022
- Enhanced Capital Allowances (ECAs): energy-saving technologies – Through Finance Bill 2017-18, update the list of designated energy-saving technologies qualifying for an ECA
Further announcements of interest from the Budget can be found below the political commentary.
Please find GK’s political commentary below (GK Strategy are TSA's Public Affairs Consultant):
The Chancellor confidently addressed Parliament in his hour-long speech, interspersing headline announcements on the NHS and housing with a series of jokes, with a packet of cough sweets even being produced at one point. The content and tone of the speech were in keeping with the Government’s ambition to prepare the UK for life beyond Brexit, invest in the technologies of tomorrow and give greater opportunities to the younger generation.
Unlike the Spring Budget where any mention of Brexit was completely absent, the Chancellor this time announced £3bn in additional funding to be allocated to support Britain exiting the European Union. Critics questioned whether Hammond, who had very little room to manoeuvre, would be able to pull a so-called ‘rabbit from the hat’. Unsurprisingly there were no headline giveaways, but the Chancellor’s announcements on housing including: a £44bn package of funding to tackle the housing crisis, the abolition of stamp duty for first-time buyers and a further £2.8bn for NHS England, were eye-catching.
The Labour Party leader, Jeremy Corbyn, responded by stating the Government had a “record of failure” on pay, economic growth, and productivity. Naturally choosing to focus on wages, homelessness, and poverty in the debate following the Budget, Labour highlighted further criticisms of the Universal Credit system and the absence of any lifting of the public sector pay cap.
The Budget document can be found in full here.
Further announcements from the Budget of interest include:
- Corporate indexation allowance – The corporate indexation allowance will be frozen from 1 January 2018. No relief will be available for inflation accruing after this date in calculating chargeable gains made by companies
- Non-resident companies’ tax – From April 2020, income that non-resident companies receive from UK property will be chargeable to corporation tax rather than income tax
- Business rates - Over the next 5 years provide a further £2.3 billion of support to businesses and improve the fairness of the system in England, by:
- Bringing forward to 1 April 2018 the planned switch in indexation from RPI to the main measure of inflation (currently CPI)
- Legislating retrospectively to address the so-called “staircase tax”. Affected businesses will be able to ask the Valuation Office Agency (VOA) to recalculate valuations so that bills are based on previous practice backdated to April 2010
- Continuing the £1,000 business rate discount for public houses with a rateable value of up to £100,000, subject to state aid limits for businesses with multiple properties, for one year from 1 April 2018
- Increasing the frequency with which the VOA revalues non-domestic properties by moving to revaluations every three years following the next revaluation, currently due in 2022
- VAT registration threshold – Consult on the design of the threshold and, in the meantime, maintain it at the current level of £85,000 for two years from April 2018
- Import VAT – Take into account that businesses currently benefit from postponed accounting for VAT when importing goods from the EU during Brexit negotiations
- Productivity White Paper – The Business Secretary will present a White Paper on productivity in the next few days
- 5G deployment on roads - Invest £5 million for a trial starting in 2018 testing 5G applications and deployment on roads for self-driving cars
- GovTech Catalyst – Create a GovTech Catalyst to help businesses navigate government and solve public sector challenges
- Funding boost to improve productivity – Extend the National Productivity Investment Fund into 2022-23 and increase the size of the fund to £31 billion, for housing, technology upgrades, and transport enhancement