‘Uncertainty is draining investment from the UK, with Brexit having a negative impact on eight in ten businesses,’ says Carolyn Fairbairn of the CBI. OK, let’s pause for a chorus of ‘She would say that, wouldn’t she?’ But even if we shade off for ‘scaremongering’, her survey (of 236 firms) is bleak: ‘44 per cent of businesses with contingency plans intend to stockpile goods… 30 per cent intend to relocate production and services overseas… 15 per cent intend to move jobs…’ And I’ve seen no rival surveys that contradict the gist of it. So what can Monday’s Budget do to make business feel better?
Suggestions abound, and Chancellor Hammond is not as hobbled as he might have been since higher-than-expected tax receipts have made it a little easier for him to meet the Prime Minister’s promise of extra NHS spending, which is his biggest headache. Here’s my own round-up of recommendations, starting with the smaller businesses that are the lifeblood of any economy in difficult times. Don’t discourage them by cutting the VAT threshold from its current level of £83,000 annual turnover, but do find more ways to relieve them of business rates, particularly where they bring disused premises back to use. And don’t abolish the incentive of entrepreneurs’ relief, which allows the first £10 million gains on selling a business to be taxed at only 10 per cent.
As for bigger businesses, don’t be tempted to raise corporation tax from the relatively low rate of 19 per cent which is generating record receipts; indeed, tinker as little as possible, since tax complexity adds another layer of disincentive to investment. Don’t rush into a hastily drafted ‘Amazon tax’ on online sales, because it will hit consumers and domestic web-based businesses while the global tech giants dance around it. And do find the odd billion to sustain scientific research that might otherwise be lost as we leave the EU.
But with so many ‘don’ts’, where will Hammond find any new money? Stand by for pain on pension reliefs, fuel duties and income tax thresholds. And if he’s looking for a gimmick, what’s the silliest proposal in current circulation? That would be tax breaks on gym membership and home fitness equipment, designed to boost the nation’s exercise levels. But Spectator readers know that’s better achieved by walking the dog, so let’s throw vets’ bills into the formula too. ‘Golden retriever relief’: there’s an eyecatcher for you, Chancellor.