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A Painful Budget For British Businesses


Responding to the Budget Statement by the Chancellor of the Exchequer, Dr. Roger Barker, Director of Policy at the Institute of Directors, said: “At first blush, there is precious little in the government’s first Budget which offers anything other than short-term pain for the business community. The government has chosen to impose a significant new tax burden on business as a means of achieving an immediate boost to its public sector spending priorities. The risk is that this will exert a negative impact on business confidence, with worrying implications for the economy’s future growth trajectory."


“On the positive side, the government has made changes to its fiscal rules, in order to accommodate borrowing for the purposes of investment, and published a corporate tax roadmap, both of which we called for in our Budget submission. The protection of public spending on R&D and the announcement of various transport infrastructure projects are also welcome. The role of the National Wealth Fund in directing investment towards the industries of the future will hopefully make a positive contribution to the economy’s long-term growth prospects."


“However, after a difficult few years, business leaders will undoubtedly find it hard to look beyond the imminent tax increases set out by the Chancellor, particularly the increases in employers’ National Insurance and capital gains tax."

"Whilst these broad changes had been largely pre-briefed ahead of the statement, the magnitude of the National Insurance tax rise is greater than expected and further adds to the burden on business."


“Business leaders can only hope that this is a big bang now, to wipe the slate clean, and that there will be no further shocks of this magnitude in the lifetime of this Parliament, enabling business to plan with more confidence.”


On changes to employers’ national insurance, Dr. Barker added: “The changes to employers’ National Insurance represent a straightforward increase in business costs and take no account of whether a business is profitable or not. At a time when business confidence is low, hiring plans have already been hit by the government’s employment rights reforms, and the minimum wage is set to rise by more than inflation, this will hit employment prospects and earnings."


“The government is seeking to make a distinction between taxes on working people and taxes on business, with the former being exempt from tax increases following manifesto commitments. However, this is a false dichotomy. The effects of higher National Insurance costs will hit profits in the near-term before being passed on in lower wages and lower employment.


“Although the increase in the employment allowance will alleviate the hit for the smallest enterprises, there is no doubt that this increase in employers’ National Insurance is a major blow for most businesses.”

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