“The OBR’s latest forecasts provide a surprisingly upbeat assessment of the UK’s near-term growth prospects. However, with little new action to address the supply side constraints weighing on economic activity, the recovery from recession may be more muted than the OBR are forecasting.
“While the Chancellor is right to say that stimulating investment is key to lifting productivity, the litmus test of these interventions will be whether they provide businesses with the headroom to kickstart new projects despite the broader economic and political uncertainty they are currently operating in.
“The boost to people’s incomes from another cut in National Insurance will be limited given that many are being dragged into higher tax bands by the freeze on thresholds.
“This budget leaves policymakers with little fiscal wiggle room to safeguard the UK against future shocks and leaves significant questions over the realism of future spending plans.”
Frank Haskew, ICAEW Head of Tax, responded to the tax measures announced:
“The measures introduced in today’s Spring Budget – specifically scrapping tax breaks for furnished holiday lettings, a replacement for the non-dom regime, and changes to the high income child benefit charge – will be complex to implement, with transitional arrangements needed, and this will increase the burden on HMRC resources. Although the replacement for the non-dom regime should be simpler in the long-term, the transition period will create a lot of short-term complexity.
“The changes to the high income child benefit charge are likely to entrench the regime and reduce the chance of the charge being abolished. HMRC will need significantly more resources if it is to collect information on household income.
“While the national insurance cut is positive for millions of workers, employers and HMRC will struggle to implement the change in time for 6 April. This cut, while reducing the NIC burden for employees, does not address the impact of the employers’ NIC charge, which remains at 13.8%. It will do little to address the incentive to hire workers off-payroll, thus continuing to cause an administrative and enforcement burden.
“HMRC is also consulting on raising standards in the tax advice market with a closing date of 29 May. Possible options include mandatory professional body membership, HMRC regulating the unaffiliated and a new oversight regulator. Whatever option is adopted, it would result in profound changes arising in the tax services sector and on those who provide paid-for tax services.”
Alison Ring OBE FCA, ICAEW Director for Public Sector and Taxation, also responded to today’s Spring Budget:
“The Chancellor has pushed back difficult decisions on public spending until after the general election, including dealing with unrealistic cuts in non-protected departmental budgets that are unlikely to be deliverable in practice. Tax rises are after the general election are therefore likely, irrespective of who wins power.
“An extensive list of spending announcements, including £5m for the 10,000 village halls in England - equivalent to £500 per hall - contained only a handful large enough to have an impact on the £1.2 trillion budget for the coming year. One positive measure was £4bn in upfront investment to deliver efficiency improvements in the NHS and several other public services.
“Overall, the Chancellor left the outlook for the public finances relatively unchanged as he used a modest improvement in the prospects for inflation and interest rates to cut taxes ahead of the general election. The public finances remain on an unsustainable path in the long-term, with public debt expected to be higher in five years’ time than it is today.”
ENDS
Notes to editors:
Contact: ICAEW media office media.office@icaew.com, tom.mackintosh@icaew.com or 07866 853 841