Today saw the release of the Chancellor’s Autumn Statement – whilst the scope of the statement covered a wide range of issues, we will sum up the main provisions affecting businesses and employers below:
Wages and Taxes (affects all businesses and their employees)
- The National Living Wage will rise from £7.20 to £7.50 in April 2017, a pay rise worth over £500 to a full-time worker over 25.
- The tax-free personal allowance will rise from £11,000 to £11,500 in April, with a promise to increase higher rate threshold to £50,000 by the end of the Parliament
- Tax savings on salary sacrifice and benefits in kind to be stopped, with exceptions for ultra-low emission cars, pensions, childcare and cycling
- Government will stick to plans to cut corporation tax from 20% to 17%
- Measures to clamp down on tax avoidance are expected to raise around £2bn over the five-year period.
- Employee and employer National Insurance thresholds to be equalised at £157 per week from April 2017
- Universal Credit taper rate to fall from 65% to 63%, effectively a targeted tax cut worth £700m in 2021/22 to those on low incomes. This will provide increased incentives for low paid workers and is expected to help 3 million households.
- Insurance premium tax to rise from 10% to 12% next June
Motoring (affects all businesses and their employees)
- Reforms to compensation for whiplash claims in order to cut the cost of motor insurance
- There will be no fuel duty rise, and duty will be frozen for the seventh year in succession, saving the average car driver £130 a year and the average motorist £350.
Whilst a spokesman for FairFuelUK praised the Chancellor for continuing the freeze, Quentin Willson, TV Motoring Journalist & Broadcaster and Lead Campaigner for FairFuelUK said:
“I’m disappointed that the Chancellor didn’t instantly put money into everyone’s pockets by cutting duty. There’s an immediate benefit to the economy. I’m surprised too given the CEBR has said cutting duty by 3p wouldn’t change net tax receipts. This is a lost opportunity from a government still afraid of supporting drivers and roads”
Investment (affects general business community, industry and public sector)
The chancellor announced that a total of £23bn would be spent on innovation and infrastructure over five years
- Government will meet commitments to protect budgets for key public services, defence, overseas aid and the pension “triple lock” until the end of this Parliament
- £2.3bn housing infrastructure fund to help provide 100,000 new homes in high-demand areas
- £1.4bn to deliver 40,000 extra affordable homes
- For the oil and gas sector, the Carbon Price Support capped until 2020 and business rates reductions worth £6.7bn
- £1.1bn extra investment in English local transport networks
- £220m to reduce traffic pinch points
- £23bn to be spent on innovation and infrastructure over five years
- £2bn per year by 2020 for research and development funding
- £110m for East West Rail and commitment to deliver Oxford to Cambridge Expressway
- More than £1bn for digital infrastructure and 100% business rates relief on new fibre infrastructure
- £1.8bn from Local Growth Fund to English regions
- Rural Rate Relief to be increased to 100%, “giving small businesses a tax break worth up to £2,900”
- £7.6m for repairs to Wentworth Woodhouse, near Rotherham, said to be inspiration for Pemberley in Jane Austen’s Pride and Prejudice
- Doubling UK export funding capacity
- £400m into venture capital funds through the British Business Bank to unlock £1bn in finance for growing firms
- Funding for 2,500 more prison officers
Controversially, the Chancellor also announced his intention to scrap estate agency fees for tenants ‘as soon as possible, a move which has unsurprisingly drawn criticism from letting agents but has been generally welcomed elsewhere.
Reactions from the HR World: (will be updated as reactions come in)
Karen Plumbley-Jones, Managing Associate (Practice Development Lawyer) and employment expert at Bond Dickinson said:
“The Chancellor announced a 4% increase in the national living wage, taking it to £7.50 per hour from April next year. While this is good news for the one million plus workers who will receive a pay rise, employers will be concerned about how they will fund this. It will add to their concerns about rising costs – caused by the fall in the value of the pound, the forthcoming rates increases and the introduction of the apprenticeship levy – and the extent to which they can pass them on to consumers.”
Professor Rhidian Hughes, chief executive of leading disability group VODG said:
“The costs of providing social care services is continuing to rise. While the national living wage is welcomed, there is no additional funding in place to adequately cover the costs of such measures. In addition, there are no breaks, like corporation tax reductions, for voluntary organisations.
The Chancellor has missed an important opportunity to put social care funding back on track. Consequently this country is seriously compromising its duty to provide essential care and support to millions of disabled and older people.”
Ian Brinkley, Acting Chief Economist at the CIPD, the professional body for HR and people development said:
“The economic forecasts from the independent Office for Budget Responsibility show that low growth and weak productivity will persist until at least 2018. The forecasts also show that real wage growth over the next two years will be close to zero. Even this may prove optimistic, as continued uncertainty, difficult market conditions, and higher unemployment are likely to constrain firms ability or need to pay more. The OBR is forecasting a slow recovery in productivity, but previous forecasts have been optimistic.
“We welcome the decision to invest £13m in the Sir Charlie Mayfield led initiative to help improve the quality of management in the UK. This is a crucial step forward in cracking the UK’s productivity puzzle which the Chancellor highlighted as a key area of focus and investment for the Government. However, attempts to improve workplace productivity will continue to be undermined without fundamental changes to skills policy, particularly in relation to apprenticeships, lifelong learning and adult skills provision.
“The decision to invest £1.8bn in Local Enterprise Partnerships is also welcome, given the need to provide more support for SMEs at a local level to help and encourage them to invest more in the skills of their workforce and enhance their management capability to boost employee engagement and productivity.”
Ian McVey, UK Director, employee insight firm Qualtrics also welcomed the Mayfield-led initiative, saying;
“Low productivity walks hand in hand with dysfunctional employee engagement. In tough times, CEOs need all the friends they can get and they have never needed to keep their employees as close as they do now. When disruption is the only constant, the employee is the strongest link with which to maintain customer trust and connectivity. The evidence is clear. Strong employee engagement reduces turnover, boosts motivation and dramatically improves outcomes for companies and customers alike”.
AXA UK’s chief executive, Amanda Blanc, expressed concern at the rise in Insurance Tax, particularly in the light of recent flooding:
“This hike – the third in the space of 18 months – represents an unwarranted attack on millions of people simply looking to protect themselves, their families and their key assets. This is a classic case of the Government giving with one hand, in the form of whiplash reforms, and taking with another. The country is already underinsured and ever rising insurance taxation could have the unintended consequence of making this situation even worse.”
Alan Price, HR Director, Peninsula said:
“The Chancellor used the Autumn Statement to confirm the new rate of National Living Wage to take effect from April 2017. From April 2017, all workers aged 25 and over will be legally entitled to £7.50 per hour. Whilst this appears to be a large increase from the current £7.20 per hour, an increase of 4% and around £500 a year for a full time worker, it is less than the expected £7.64 which was discussed earlier in the year. The rise is designed to improve the living standards of working class people and their families.
This is the first increase in the National Living Wage (NLW) since it was introduced in April 2016. The rise brings the wage in line with the government’s target of having a NLW of £9 an hour by 2020, however, it is significantly lower than the November increase in the voluntary Living Wage as this reached £8.45 in the UK and £9.75 in London.”
Adrian Lewis, Commercial Director for HR software company Activ People HR, said the Welsh Government also needed to invest in infrastructure:
“We welcome the increase in the National Living Wage and the promise of more investment in transport links, however the Welsh Government needs to make sure that investment in Wales’ infrastructure is also made. Broadband speeds and the road and rail networks this side of the Severn Bridge often inhibit business objectives, we cannot become the poor relation as investment in England increases.”
Lee Biggins, founder and managing director of CV-Library said:
“Our economy’s employment is currently at a record high and in order for this to continue, we must tackle the upcoming challenges head-on and prepare to be resilient as we embark on our exit from the EU. Most notably, the UK labour market is forecasted to remain robust and to grow every year up until 2020, confirming business confidence across the UK. Our own data confirms this: in the months following the Brexit (July 2016 – October 2016, inclusive) we found that job postings actually increased by 7% on the previous year, while applications and salaries also rose by a steady 2.4% respectively.
“With investments being made in the UK’s house building, transport infrastructure and science sectors, we should see job creation boost in these areas, bringing about new opportunities for workers all over the UK. Furthermore, the increase in the National Living Wage brings positive news to many workers across the nation and it is good to see that the government recognises the need to raise pay in order to boost productivity and ensure that our country is keeping up with some of our European counterparts.”
Katharine Moxham, spokesperson for GRiD, the industry body for group risk protection, expressed concern that no exemption would be made for group life or income protection, saying:
“We are obviously disappointed that Government has not seen fit to give an exemption for group life or income protection where employees are able to increase their coverage through salary sacrifice. The amounts involved are small and the resulting change will simply add complexity for providers and scheme members. It will add a further burden on businesses which might otherwise have included a facility to allow their employees to build on a basic level of employer-provided cover.
“GRiD put forward the case for the provision of these benefits to be encouraged as they:
- Reduce the burden on the State (both through reduced expenditure on State Benefits and increased revenue through tax and NI).
- Provide value to employers and employees.
- Are aligned to DWP goals of supporting people back to work.
“The outcome is particularly pertinent for group income protection given that the DWP/DH green paper on work, health and disability has recognised the role that group income protection can play in supporting employers’ health, wellness and attendance programmes. Clearly some joined up thinking needs to take place here.”
Lucy-Rose Walker, CEO Entrepreneurial Spark welcomed the investment in broadband:
“Technology is a great enabler for business growth and here at Entrepreneurial Spark we’re seeing growing momentum across the UK in the technology sector. Investing in broadband will help more internet based businesses to grow, however many of our Chiclets and alumni are facing issues in accessing basic broadband services, so access for all should be prioritised before investment is made into 5G networks. We are currently looking to the future to help entrepreneurs right across the UK through a virtual business growth enablement programme so access to broadband is essential to help us deliver this.”
Recuitment Industry body APScO commented:
“The Government has announced that it is to introduce IR35 tax changes, which will result in Personal Service Company contractors in the public sector losing their right to determine their tax status. We are furious that the Government has ignored all industry stakeholders and has overridden the concerns of its own departments. This change will give recruitment firms and other engagers, who pay the contractor, liability and responsibility for operating payroll and paying the correct taxes to HMRC. These changes will convert the UK from having one of the most flexible labour markets in the world to having one of the most inflexible labour markets in the world.”
XpertHR content director Mark Crail also expressed concern over the impact of the lower than expected Living Wage increase:
“The increase in the National Living Wage from £7.20 to £7.50 next April is considerably less generous to the low paid than it first appears. At the time the NLW was introduced in April of this year, it was forecast to rise to £7.64 in April 2017, and then again year on year until it hit £9.16 or 60% of median earnings in April 2020. But earnings are now expected to rise considerably more slowly, with the Low Pay Commission suggesting a likely end-point in 2020 of £8.61.
“That means that in April 2017, an employee on the NLW will be 14p an hour worse off than they would have been if earnings had continued to grow at the rate they were in April 2016. For someone working a 40-hour week that’s £5.60 a week or £291.20 a year. By April 2020, they will be 55p an hour worse off, which amounts to £22 a week or £1,144 a year.
“On the other hand, employers in low-wage parts of the economy, particularly the care sector, will breathe a sigh of relief. An employer with 100 employees on the National Living Wage rate will save £560 a week on their wages bill from next April or £29,120 in the full year. By 2020 their wages bill will be £114,000 a year less than it would have been on the April 2016 projections.”
John Dean, Managing Director, Punter Southall Health & Protection said the clampdown on salary sacrifice schemes was expected:
“The clampdown on salary sacrifice schemes announced by the Chancellor today wasn’t a surprise; it has been talked about for some time. The government loses around £5bn a year through these schemes, so it is no wonder they are restricting them to regain lost tax revenue.
“Salary sacrifice schemes have become increasingly popular, with their use rising significantly year on year – by as much as 30% since 2010, according to some reports. But very sophisticated salary schemes only tend to run by larger companies operating sophisticated flex benefits programmes and actually benefitting only a small % of the UK workforce. These schemes weren’t really accessible for lower salaried workers because for many people, using them would have taken them below the minimum wage or they are in employment where companies do not invest heavily in employee benefits.
“Today’s announcements gives us all clarity over what can be included in salary sacrifice schemes – pensions, childcare vouchers and cycle to work schemes. All these benefits are seen as being important to people and they are ones that most companies, whatever their size, can offer so the Chancellor has actually leveled the playing field for all companies and has provided clarity in this area.
“Companies that run many benefits through salary sacrifice will be impacted by these changes, as will the benefit suppliers who have relied on a tax break to sell products. The whole world of voluntary employee benefits will now need to evolve to ensure it provides relevant products to employees in a world where tax breaks no longer support their products.”
Morag Livingston, Group Risk & Healthcare Manager at Secondsight (part of the Foster Denovo Group) expressed concern that the increase in insurance premiums could lead to employers reducing their healthcare provisions for staff, saying:
“These increases will have an impact for many employers when it comes to their healthcare provision. And for some employers, the increasing cost of providing private medical insurance (PMI), dental cover and cash plans may even force them to stop offering some of these much sought-after benefits altogether.
“Not only will employers be impacted but I believe that as a direct result we’re going to see an increase in the numbers of people in the UK who are uninsured for healthcare, as increasing numbers of people choose not to take out private medical insurance or not to renew.
“This reduction in take-up could have an impact on the NHS, adding greater pressure to an already overstretched resource”.
Alan Morahan, Managing Director, Dc Consulting at Punter Southall Aspire welcomed the fact that there were no major changes to pension legislation:
“This was an Autumn Statement that gave to the UK pension system by not making any major changes to pension legislation and thereby allowing all stakeholders to pause for breath after years of break neck speed of change.”
Steve Herbert, head of benefits strategy, Jelf Employee Benefits expressed concern at the lack of an official start date for tax-free childcare:
The proposed phasing-out of Childcare Vouchers and replacement with Tax Free Childcare also featured today. The Treasury document includes this following passage:
“Tax-Free Childcare will be introduced gradually from early 2017, with roll out beginning upon completion of the trial. Once the scheme is fully rolled out, the government will review its operation to ensure it is delivering as intended and to assess the benefit it is delivering for working parents.”
So we still don’t have an official start date for Tax Free Childcare.
The use of the word “trial” is interesting. This suggests that the final details of this benefit may still be in flux. This may however just be loose terminology, and in any case know that Childcare Vouchers schemes can continue to take new entrants until April 2018 regardless of the final official launch date of Tax Free Childcare. We would encourage employers to discuss implications and options with an expert as soon as possible.
Brett Hill, Managing Director of The Health Insurance Group said that the doubling of IPT will penalise those with private health insurance and put additional pressure on overstretched NHS resources:
“It is not easy for medical insurance policyholders to change insurer in return for a reduced premium. Many will have medical conditions for which they have recently or are currently claiming, and so will be unable to change insurer without losing cover for the medical conditions that matter to them the most. These customers will be faced with a stark choice, renew with their current insurer and pay higher premiums that they may not be able to afford, or cancel their policy and fall back on the NHS to pick up the bill for treating those conditions.
“Those who have made the decision to take responsibility for their own health care, and reduce the burden on the NHS, are now being penalised for having done the right thing.”