Autumn statement a ‘missed opportunity’ for small businesses

The Autumn Statement, which was presented to parliament by Jeremy Hunt, chancellor of the exchequer, on Thursday, presented a cocktail of tax rises and spending cuts designed to calm markets recently spooked by former prime minister Liz Truss’ failed ‘mini-budget’ in September.

However, Martin McTague, chair of the FSB, said that many of the measures would have a detrimental impact on its members.

He noted that the decision to freeze thresholds for national insurance, which will pull more people into higher tax bands over time as wages rise, amounted to “a stealthy hike in the jobs tax” as it had occurred during a period of high inflation.

McTague also added that freezing the VAT threshold during a period where inflation has surpassed 11% would drag many smaller firms into the tax’s scope and dis-incentivise growth.

FSB research said that one in four of small firms and the self-employed ( 24%) are currently held back by the VAT threshold.

The decision to cut the amounts available to businesses through the research and development (R&D) tax credit scheme from 14.5% to 10% would also have a major effect, said McTague.

“The chancellor has stewardship responsibilities to the next generation and he has failed with this move to kill R&D,” he explained.

“The Office for Budget Responsibility will need to look again its assessment of the impact in due course as the Office for National Statistics completes its revision of UK R&D statistics.”

McTague also criticised the reduction in dividend tax allowances, and said it meant that owners of small limited companies would be worse off than employees on the same salary.

However, McTague also welcomed the retention of the employment allowance at its current level and the continuation of the lower national insurance rate for the self-employed and employees.

Business rates were also protected from inflationary pressures, which avoided a 10.1% increase in bills, and the energy support package was retained for businesses until April.

McTague said: “While tackling inflation is essential, so are measures to create conditions for prosperity, growth and support enterprise. Today is a missed opportunity to avoid further economic slowdown.

“The Chancellor may consider that today’s statement has steadied the economic ship after recent turbulence. But it is now time to raise the anchor, re-start the engines and set a course towards economic recovery, promoting enterprise and innovation, and future prosperity.

“Whether that direction is set in the coming months is a decision which will be make or break for many small businesses.”