Member Article

North West reactions to Budget 2014

Business leaders, politicians and finance experts across the region have greeted the 2014 Budget with a wide variety of responses.

Lesley Martin-Wright, Chief Executive of Knowsley Chamber of Commerce, said: “Mounting energy costs are a major worry for SMEs, so any move to reduce costs through a carbon tax cut will be welcomed.”

Simon Walker, executive director at Quilter Cheviot’s Liverpool office, said: “In a day when the economic recovery, and its imbalances, was made abundantly clear, the Budget leaned more to politics than sound economic micro-management.

“Investment, exports and building all featured as headlines, but with little substance. Instead, savings and savers were the key focus.

“The opposition challenge regarding living standards is clearly hitting a raw nerve, so easier access to pensions, better terms for ISAs and Premium Bond investors represented the crescendo of the Chancellor’s speech. What did we expect with an election 15 months away?”

Quilter Cheviot is one of the UK’s largest independently owned discretionary investment management firms. Based in 13 locations across the UK, Jersey and Ireland, it works with private clients, trustees, charities, pension funds and their professional advisers.

Peter Mooney, head of Consultancy with business support agency ELAS welcomed the Chancellor’s plans to reduce and equalise tax on flights - especially to the Far East - as a measure of support and assistance to UK firms trading and exporting globally.

He said: “For a relatively small outlay, we think the country will benefit from extra income from exports and invisible earnings, won by the hard slog of trade initiatives. And it is a good thing that he has doubled lending to support exporters, with lower interest rates. Exports are the key to a properly sustainable recovery.

“Similarly, we welcome discounts to business rates and help for Enterprise Zones - that will allow more fledgling firms to grow with the economy.”

“We also welcome his measures to make childcare more affordable - that will help both employers and employees - more people will be better able to afford decent child-care, and go to work secure in the knowledge that their children will be safe and happy.”

George Osborne’s increases in the personal tax allowances also won approval.

Said Mr Mooney: “Again, this helps people who are in work, but whose earnings are at the lower end of the scale. It gives them a little extra cash in their pockets, and helps businesses too, simply by making going to work a more attractive option for more people”.

ELAS assists thousands of companies of all sizes across the UK and the Republic of Ireland, providing legal advice, as well as other support including HR guidance and Payroll services.

Karen Campbell, head of tax at accountancy firm Grant Thornton in the North West, said: “In general, there’s obvious disappointment that the Chancellor failed to adjust the thresholds for Stamp Duty Land Tax.

“The thresholds have been at their current level since around 2000 whilst some house prices have doubled in that time. Given that house prices are now starting to rise again, partly driven by the Help to Buy scheme, it would have been a logical measure to increase the thresholds or more radically to abolish the current cliff-edge system in favour of a graduated rate.

“The current rules are depressing the value of homes at the £250,000 and £500,000 price levels where a £1 increase in price can mean a £5,000 increase in SDLT.”

“Helping more buyers to enter at the lower end of the market would result in more transactions, getting property chains moving and bringing much-needed housing onto the market.

“It’s hard to see the extension of the 15% SDLT on residential properties purchased through a company to properties in the £500,000 to £2m price band having much of an impact on the tax take or prices.

“There will be an unlucky few caught out by this surprise change, who face paying three or four times as much as they were expecting. But for the most part people who buy through companies are looking at higher value property to warrant the costs of operating a corporate structure.

“In terms of stimulating demand, house builders will be disappointed at the Chancellor’s apparent lack of focus on housing. There were some welcome measures including the extension of the Help to Buy scheme and the £500m Finance Fund.

“However, to boost the supply of homes needed to meet demand housebuilders want to see an effective release of public land for house building, increases in the borrowing capacity of housing associations and extended government guarantees to back financing for new development.”

“The property industry also wanted to see more done to ease the business rates regime - although rates discounts and enhanced capital allowances for designated enterprise zones such as Manchester’s Airport City, Sci-Tech Daresbury and Liverpool Waters will be welcomed.

“Among the better news were the budget announcements around new housing and infrastructure projects such as the continued support of HS2 and the £270 million guarantee for Mersey Gateway bridge - great examples of investments which will improve people’s lives now and in the future. They also send a positive message to investors.”

Greater Manchester’s theatres have welcomed plans to introduce tax relief for the industry, announced in the Budget.

A consultation has now been launched on the proposals, with the new tax reductions coming into effect on 1 September 2014.

The new theatre tax relief will support theatres across the UK, as well as touring productions. It will offer a relief rate of 25 per cent for qualifying touring productions and 20 percent for other qualifying productions.

The initiative has been welcomed by several regional theatres including the Royal Exchange and the Palace Theatre in Manchester, and the Octagon in Bolton.

Fiona Gasper, Executive Director at the Royal Exchange in Manchester, said: “This is a really welcome piece of news.

“Although the detail has yet to be sorted, it appears that the theatre tax relief legislation will enable what is in effect a new income stream for the producing theatre sector for which the Department for Culture Media and Sport must be applauded.”

Roddy Gauld, Chief Executive at the Octagon in Bolton, said: “Regional theatres like the Octagon are an important part of an industry which is celebrated across the globe. Numerous world-class actors, designers and directors have begun their careers here, as have new plays that are now part of the canon of British work.

“The health of our industry relies upon investing in new talent, ideas and audiences, so this is welcome news and recognises the important cultural and economic contribution the Arts makes.”

Sir Howard Panter, Chief Executive of ATG which runs the Palace Theatre and Opera House in Manchester, said: “ATG fully supports the Chancellor’s Budget proposals to extend the creative sector tax-credit arrangements to include UK theatre production.

“The move is both recognition of the importance of theatre to the national economy and a vote of confidence in what is a world-beating industry.

“The focus on incentives for regional touring is particularly welcome; touring productions are the lifeblood of the sector and generate significant cultural and economic impact around the country.

“Incentives like this will encourage a wider range and a greater volume of touring shows – delivering real benefits, not only to producers or those employed in the theatre industry, but to local authorities, businesses and communities throughout Britain.”

Sarah Maxfield, Northern Area Director at the Arts Council, said: “The performing arts make a significant contribution to the UK economy and our quality of life – and the theatre tax relief is important recognition of that.

“The scheme will help to create an environment where creative risks can be taken, and where work can be more easily produced and toured. As such, it is vital that it supports the theatre sector across the entire country and benefits arts organisations that receive public investment.

“During this consultation period, we will work closely with the government and performing arts organisations to ensure that the scheme helps diversify funding, thereby offering further support for the sector.”

Paul Henthorn, a senior manager in pensions at Grant Thornton North West said: “The budget announcement is an unprecedented change in the way pensions are taken at retirement giving far more flexibility than is currently in place.

“Pensioners will still have to consider the long term though, pensions are ultimately there to provide a regular sustainable income in retirement. Drawing the whole pot out and then spending it will mean relying on the state pension for the rest of your life. Not a pleasant prospect.

“Effectively all pensioners are being given the option to go into a form of drawdown of their pension funds. The investment risks with drawdown are still there though and it will be crucial for people to seek advice on an on-going basis. The danger is drawing too much income whilst the pot is dwindling with poor investment returns. Again advice will be critical.

“The introduction of free impartial advice for pensioners with fairly low pots is a good thing, as they will be able to access the right advice and if annuity purchase is the right way to go, will enable them to get best value. Although I’m not sure how this will be funded.

“For a typical Grant Thornton client, not a great deal has changed and they will continue to review their situation every year to ensure that their income remains sustainable throughout their lifetime.

“Mr Osborne has stated that the government believes that the 55% charge on lump sum death benefits is too high and will now consult and possibly review this which can only be a good thing for our clients”.

Paula Abbott, tax director at Lloyd Piggott, a full-service accountancy firm, said: “The Chancellor delivered the Budget with a resounding message regarding the UK economy - ‘growth up, jobs up, deficit down’. With that in mind, there are a few changes that are noteworthy for local businesses and the community as a whole.

“Firstly, we are delighted with the doubling of the Annual Investment Allowance to £500,000. This will greatly assist manufacturing businesses and could potentially cut their corporation tax bill by £50,000. There was a lot of support in this announcement for manufacturers across the UK, which is an encouraging step for the economy.

“There was also positive news for savers, particularly pensioners, by increasing the ISA allowance to £15,000 – tax free. Increased flexibility and generosity will allow more freedom for people to get the most from their savings and the choices they have.

“The changes to pension reform will affect many people and give them greater control over the money they have in their pension pots and will not force them to buy a low paying annuity. Reducing the 55% tax charge on money taken out of the pension pot above the tax free lump sum will also be great news for many people in their retirement.”

Paul Hyland, tax partner with DSG Accountants in Liverpool said:“There are clear targeted areas in the budget that will benefit North West manufacturing businesses particularly manufacturers.

“The increase in the annual investment allowance from £250K to £500K to 5 April 2015 will really encourage businesses to reinvest where they can grow. This taken with the four steps to reduce energy costs should help keep costs down particularly as wage pressure increases.

“Two pieces of good news for savers, the pension simplification should encourage more of us to provide for retirement and the increase in the ISA allowance to £15k should encourage those who can afford to, to save. The shape of personal finances is changing and saving is a key part of those changes.

“Aggressive moves to combat tax avoidance will surely almost kill off these schemes. It’s good to hear that the economy is growing but after the last boom or bust I’d like to know that it’s the right sort of growth”.

Jenny Stewart, CEO of Liverpool and Sefton Chamber of Commerce, said: “The 2014 budget will be broadly welcomed by businesses as balanced and supportive of those who are fueling the economic recovery.

“The support given to exporters is particularly welcome, with lending for export finance doubled to £3bn and interest rates on that lending cut by a third. Also the £7bn package to cut manufacturing energy bills will help to stimulate and support this vital sector in building a strong, modern economy.

“We do however believe the Chancellor has missed a great opportunity to reform the antiquated business rates system, which continues to penalise small businesses”.

Tony Attard, chair of the Institute of Directors North West and chief executive of Burnley-based manufacturer Panaz Limited, said “As both an entrepreneur investor, chairman of a construction company and CEO of a North West manufacturer, I thought that the Budget promoted growth encouraged exports and helped the re-shoring of manufacturing.

“I am sure that it will be welcomed across the North West business community. The increase in capital investment allowance from £250,000 to £500,000 will be a great incentive for business to invest in new equipment and technology, and the reduction in carbon tax to reduce energy costs further helps manufacturing.

“Incentives to invest in new companies with an extension to the SEED investment scheme is welcome, as well as research and development tax credit increases. Incentives to take on more apprentices and tax breaks for the under 21s will also help employers wishing to take on more young people”.

Bob Taylor, CEO of the First Ark Group, based in Liverpool, said his initial reaction was ‘positive’, but warned: “Those advising businesses must play their role in ensuring that they promote social investment to their clients, as there must be enough take-up of the initiative to make a difference”.

Mike Stott, Associate Partner with DSG Liverpool said: “In my view, the two biggest announcements were: first, the doubling of the annual investment allowance. This has been around since 2008 and was relatively small in the first few years (£10k-£25k). It increased to £100k but then dropped back to £25k. Then in the past 2 years, it has increased massively to £500k.

“My view is that it will act as a stimulus for the economy and will encourage businesses to buy capital equipment. If this equipment can be purchased from within the UK, rather than being imported, then there is a double whammy for the economy.

“DSG will be busy trying to work out the annual investment limit when the businesses’ year-end is not congruous with the introduction of the legislation.

“Second, the significant loosening of the tax rules concerning defined contribution pension schemes.I did a quick calculation on the childcare costs and think this will only benefit where this is more than one child”.

This was posted in Bdaily's Members' News section by Simon Malia .