John Healey set out a plan to ease the hardship faced by small firms and households but faced criticism that his “breathing space” budget would do little to tackle the cost of doing business and kickstart growth.
The Chancellor announced series of measures to help entrepreneurs and the high street through a series of tax changes and reliefs.
He described his statement as a budget “for the “working people of Britain, for British businesses big and small”.
Critics said that he had chosen to play safe rather than commit to bigger reforms and stimulus packages and had left businesses underwhelmed.
There is an extra £20.4bn for the National Wealth Fund and the British Business Bank, with the latter expected to double its commitment to female-led businesses.
However, a hike in the minimum wage, while helping the low paid, risks discouraging firms from employing more staff.
The expected commitment to spending 3% of GDP on defence has been delayed, though there were assurances that it will feature in next year’s spending review.
Mr Healey announced a 25% reduction in electricity bills for eligible industrial businesses as part of plans to reform how energy costs are structured. There was little immediate support for most businesses facing high energy bills.
The big announcements concerned a £100 energy payment to those living in council tax bands A to D in England, and a hike in the business rates threshold from £12,000 to £18,000 that will mean 70,000 shops, restaurants and gyms, also in England, will pay no rates at all.
Mr Healey urged the devolved governments to follow suit on both measures. Over 1.8 million households in Scotland would be eligible for the energy payment.
He said he would claw back some of that lost revenue by raising gambling taxes. Machine games duty will rise to 25% from 20%, a move that could lead to the closure of 1,000 betting shops and 9000 potential job losses, according to EY modelling. This will not just hit sports such as horse racing, but will impact on the rural economy.
A fourth consecutive duty increase on spirits will see the tax burden on the average bottle of Scotch Whisky rise to 74%.
Banks were relieved that the 3% increase in the surcharge was lower than expected and is for just 15 months. Their shares rose sharply.
The government will be scrapping a number of big ticket plans, such as carbon capture and storage and hydrogen projects, which will be a blow to the north east of Scotland which was hoping the Acorn project would go ahead.
The Chancellor announced higher taxation on rental and savings income from 2027, but confirmed that the planned changes to ISAs, announced by his predecessor last year, will not go ahead.
He said borrowing will be down to 1.8% by 2030/31. On debt as a percentage of GDP, he said it is forecast to fall by 81.7% in 2031/32.
The IMF pointed out that the UK now “stands out” as a country where action to reduce debt and deficit has been taken decisively, he said.
“They project our UK deficit will be the lowest in the G7 by 2029.”
Reaction
Entrepreneur Robert Kilgour, founder of campaign body Scottish Business UK, said: “If this Budget was supposed to be a major step in the right direction for British business, someone hand Healey a compass.
“Cutting business rates to zero for 70,000 businesses, support for young entrepreneurs and tax relief for founders are welcome, but a record 738,000 British businesses are in significant distress due to soaring taxes, increased minimum wages and crippling energy costs.
“Healey had a chance to turn a page and get the UK back on track – instead, he is sleepwalking the UK economy towards the cliff edge of recession with a timid and feeble Budget that does little to ease deep frustration over taxes and the barriers to business growth.”
David Ovens, joint managing director at Archangels, said: “This is a nuanced Budget for entrepreneurs. Halving Business Asset Disposal Relief to £500,000 is disappointing, but the new founder allowance, offering a 10% CGT rate on gains up to £10m, is a positive step that rewards the people who take the biggest risks.
“Today’s measures are, on balance, positive and the real test will be whether government builds on them to give founders and investors across the UK the long-term confidence to start, scale and stay.”
Rain Newton-Smith, CBI chief executive, said: “Our economy faces big global challenges, and the government has set out big ambitions to boost prosperity – today’s Budget does not meet the scale of that ambition. On the face of it, this Budget lacks the bold moves that would have made it easier for firms to invest, hire and grow.
Mark Kent, chief executive of the Scotch Whisky Association said: “Today’s spirits duty increase announced by the Chancellor is a disappointing blow to the Scotch Whisky sector, its supply chain and the local communities it supports.
“We’ve repeatedly warned that increasing the spirits super tax will not only pile further costs on distillers, but will harm the supply chain and reduce Treasury revenue.”
Adrian Johnson, tax manager at accountants MHA, said: “Scotch whisky producers had hoped for an excise duty cut after successive increases damaged the trade. A further rise in line with RPI risks more cuts to jobs and production at distilleries across Scotland.”
Gail Boag, ICAS CEO, said: “The real test of this Budget is what comes next. Targeted measures to ease energy bills, freeze business rates and encourage investment may provide much-needed relief to households and small businesses, but short-term measures are no substitute for a credible, detailed, long-term plan for growth.
“Rather than continuing with piecemeal changes, the Government must commit to fundamental structural reform of the tax system to strengthen the UK’s economic resilience and help businesses weather global economic storms.”
SNP Economy spokesperson Kirsty Blackman said: “The UK Budget shows the Labour government doesn’t get Scotland – and isn’t doing anywhere near enough to protect people from the looming cost of living emergency this winter.
“This isn’t a budget that a Scottish Chancellor would have delivered. Instead of providing meaningful help, it has abandoned families in the face of soaring bills and has imposed another betrayal on Scotland’s energy – with the decision to scrap Scottish carbon capture funding.”
STUC General Secretary Roz Foyer said: “We always knew exorcising the ghost of Thatcher and eradicating 40 years of neo-liberalism was going to be a tall order for the Chancellor and there are some welcome tricks in the Budget, but not enough to scare away fears of rising costs.
“Whilst this Budget offers some helpful sticking plasters on energy costs, cost-of-living support and food prices, it falls short of the radical surgery needed to fix the UK economy and support working-class communities.”
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