In his first Autumn Statement as Chancellor of the Exchequer, Philip Hammond laid out his fiscal vision for the UK.
Hammond lived up to expectations, appearing quite pessimistic about the economy’s growth following the country’s decision to leave the European Union.
There was talk about deteriorating country homes, the earthshattering revelation that this will be the last Autumn statement ever (the budget will now be announced in the autumn as opposed to spring, there will now be a spring statement instead) and the usual back and forth between the government and the opposition.
We’ve picked some of the announcements that may be the most pertinent to the day-to-day running of your business:
The living wage is set to increase
The national living wage (NLW) will increases from £7.20 to £7.50 in April next year, equating to a £500 a year pay rise to a full-time worker.
John Harding, partner at PwC commented: “Whilst the Chancellor’s announcement is positive news for working families, the additional strain on ‘EJams’ – employers just about managing – should not be underestimated. This is comes at the same time as employers are facing a triple whammy of additional costs from the apprenticeship levy, holiday pay charges and pension auto-enrolment increases.”
'Salary sacrifice' cuts
As expected, salary sacrifice schemes have seen significant cuts, as Hammond deemed them ‘unfair’. Special protection was given to ultra-low emission company cars, pensions saving, childcare and the cycle to work scheme until April 2021 – other perks will now be taxed. This could cause headaches for employers, and risk decreases to productivity.
Nick Willis, director and solicitor at PwC said: “Salary sacrifice arrangements form part of employees' terms and conditions. Employers will therefore need to look urgently at these arrangements and the contractual promises they have made to assess whether, and how, benefits will be continued post-abolition of salary sacrifice. Difficult issues will arise on who will bear any increased cost in benefit provision and whether an employer has the flexibility to cease providing a benefit that has become prohibitively expensive."
Investment in productivity
Productivity has been a sticking point for this Conservative government. The UK’s productivity is much lower than our fellow G7 members, something that clearly rankles the new Chancellor, “we lag the US and Germany by some 30 percentage points. But we also lag France by over 20 and Italy by 8. Which means in the real world, it takes a German worker 4 days to produce what we make in 5; which means, in turn, that too many British workers work longer hours for lower pay than their counterparts,” said Hammond.
The UK will borrow £23billion over the next five years to invest in infrastructure and innovation to raise the country’s productivity, including a £13million investment to help improve the quality in management in the UK. The initiative is to be led by Sir Charlie Mayfield.
Anne Francke, CEO of the Chartered Management Institute said: “The Chancellor’s £13million pledge for Sir Charlie Mayfield’s review to support firms’ management skills shows that as a nation our businesses too are only just about managing (JAM). Currently, only one in five businesses invest in management skills. The Chancellor’s comment signals that we need world-class management and leadership to close the gap with our G7 competitors.”