‘Several important measures’ as Chancellor announces mini-budget
The measures announced by Chancellor Kwasi Kwarteng have been met with cautious optimism by the sector
James Bielby, Chief Executive, FWD, says: “FWD welcomes several of the business-related measures announced by the Chancellor today. The recent escalations in the cost of doing business, food price inflation and the pervasive impact of the energy crisis needed to be addressed and several important measures have been introduced today.”
In particular, FWD welcomes the principles of investment zones, in particular the associated 100% business rates relief, National Insurance relief, allowance for machinery assets and relaxed planning laws. “We hope to see these zones applied widely to encourage the growth of the wholesale sector and for some of the perks, such as rates relief, to be offered on a nationwide basis,” said Bielby.
He also welcomed the steps by government to revisit IR35 rule changes. “The reforms of 2021 contributed to the HGV driver shortage which plagued the wholesale sector,” said Bielby. “We are keen for the government to find a solution which supports self-employed workers and protects our vital supply chains”.
Other well-received measures include a freeze in alcohol duty, on which Bielby commented: “Freezes in alcohol duty are essential to combat rising inflation and the cost-of-living crisis. We therefore welcome the steps taken by the Chancellor to introduce an 18-month freeze on all alcohol duties.”
Tom Gittins, Managing Director of Confex, agreed that the moves should give confidence to the sector:
“The UK economy needs a jolt to drive growth and it is hoped that the cuts in income tax allied with the help given to first-time buyers will help to increase consumer spending while also bolstering consumer confidence.
“Combined with the energy support packages for UK households and business announced earlier in the week, and with signs that fuel prices and food inflation are beginning to stabilise, we can be increasingly confident that the UK could avoid a recession this winter.’’
Others, such as Adam Reader, Finance Director of Wanis International Foods, are more cautious:
“While the country is facing a massive pressure on spending power, such a raft of tax cuts is a massive gamble. There is no guarantee that these tax cuts will stimulate spending, but it will provide some relief in the current inflationary environment. How much relief and how much it will benefit lower-income earners remains to be seen as it appears the bigger benefits lie with higher-income earners. It also appears to contradict the Bank of England position in respect of raising interest rates to counter inflation by delivering more disposable income to consumers.
“My big concern that this will be funded by borrowing, along with the other measures (such as the fuel cap) and this needs to be repaid in the future so it is likely these tax cuts will need to be re-reversed to pay the new debt.”
There is disappointment that the government hasn’t gone further in its use of VAT to stimulate the economy. “A lower VAT rate for hospitality venues will encourage participation in the UK economy, drive growth and support a struggling hospitality sector,” said James Bielby.