Reflecting on the Budget
The fallout that has ensued following Ian Duncan-Smith’s resignation and the Personal Independence Payment debate have overshadowed much of the Chancellor’s Budget. But, as always, you need to take time to delve into the detail of such announcements and digest the raft of changes.
What is clear, is that Mr Osborne – after undershooting two out of three of his Autumn Statement and Spending Review promises – is betting on small businesses to boost the economy and help him achieve a budgetary surplus.
Much of the commercial world will welcome the further reduction in corporation tax to 17 per cent by 2020. For smaller companies, the attack on business rates will provide relief and its annual thresholds will exempt more than 600,000 from paying rates altogether from next year.
Interestingly, the support for the self-employed was clear. The cuts to Capital Gains Tax and Class 2 National Insurance contributions will certainly foster a better climate for entrepreneurialism.
In the case of larger corporates, there may have been a very different reaction to the speech. It is evident that large corporates will be shouldering some of the burden, such as the apprenticeship levy, to help pay for the numerous giveaways announced.
Now, as the Chancellor looks to get Britain's public finances back in the black by the end of the decade, he will do so amidst jitters in global financial markets, low productivity and scarce opportunity to raise significant tax revenues in a weakening economy fades.
Unfortunately, the public sector is likely to bear the brunt of the need to balance the books and spending cuts and ‘efficiency savings’ will continue to top the agenda for leadership teams in healthcare and education, as well as local government. Challenging times, indeed.
We are also keeping a close eye on the impact of the Chancellor’s IR35 reform to off-payroll engagement in the public sector. The policy will likely place further administrative pressures on public sector organisations even before the April 2017 implementation deadline. We’ll be working closely with our clients and candidates to prepare and ensure compliance.
Those with control over the purse strings will always need to take stock of the Budget and seek external advice and support to respond. But, the response required from the public sector will likely need to be transformational. The way that organisations operate and deliver their services is changing. For the financial year ahead, it will be those that can tap into the best commercial expertise that succeed in navigating the choppy waters that lie ahead.