Healey seeks “breathing space” for businesses as banks and gambling foot the bill
Chancellor John Healey sought to give “breathing space now” on the cost of living and the cost of business in a Budget that prioritised reducing energy bills funded by a bank surcharge and taxes on the gambling sector.
He laid out a “radical” roadmap for fiscal devolution for the regions as part of the Government’s ambition of “driving good growth in every postcode”.
Burnham, who became Prime Minister in the summer after stepping down as Greater Manchester Mayor, has set out a platform focused on moving more power out of Westminster.
His Chancellor revealed what he claimed was “the most radical act of devolution in a generation” by providing a roadmap for fiscal devolution, “making the commitment that 100% of business rates will be retained locally by the end of the decade”.
It will start with 20% of business rates next year, and a share of income tax receipts from 2028, to “be used to back investment into big local infrastructure”.
There will also be new Good Growth Funds for Mayors and areas without mayors, and £1.5bn for devolved loans for mayoral authorities.
Regional funding measures included £10m for a new market hall in Stafford, £10m for Bristol’s Temple Quarter scheme, £15m to upgrade the Leeds College of Building, £20m to restore Liverpool’s Littlewoods Building, £18m for advanced chip design led by Edinburgh University.
Healey’s first Budget as Chancellor, coming 101 days after moving into Number 11, also focused on the impact of energy bills.
“My choice in the budget today is to give families and businesses some breathing space now”, said Healey, as he announced a £100 energy payment for households in council tax bands A-D in England, with funding for Scotland, Wales, and Northern Ireland’s governments to do the same.
He extended the existing VAT cut on electricity to next July, the British industrial competitiveness scheme will take 25% off electricity bills for 10,000 firms at the heart of British industry in April, and be backdated to cover energy costs this year.
From next year standing charges will be removed from gas bills, with similar reforms to electricity bills to follow.
Healey said: “I’ve made my choice at this budget, asking a bit more of our banks to support ordinary people, raising taxes on gambling to support good growth on every high street.”
The threshold for small business rate relief to retail, hospitality, and leisure businesses will be increased from £12,000 to £18,000, with 70,000 businesses being taken out of paying business rates.
It is being paid by taxes on gambling through increasing machine game duty, while adult gaming centres and vape shops will be excluded from the extended business rates relief.
Healey was overt in positioning the Budget as supporting business and entrepreneurs, mindful of the criticisms of his predecessor Rachel Reeves’ first Budget.
He introduced founders’ relief, a new relief in capital gains tax, which will create a 10% rate on lifetime gains up to £10m for the founders of the country’s most successful firms.
Other measures to support entrepreneurs included the creation of EMI 2, “doubling the generosity of the company share option plan”, launching a new young entrepreneurs’ allowance and a new scale-up programme for female founders.
“I believe that when business founders take that risk, build an exceptional company, create wealth for Britain, we should recognise that success and keep those people here to invest again,” he said.
However he also reduced the threshold for business asset disposal relief in capital gains tax from £1m to £500,000, and increased the rates on tax on income from property and savings by a further two percentage points.
Healey said: “Providing support for British families and businesses has meant raising some tax to meet my commitment to fiscal discipline.
“I’ve done this in a balanced way, protecting the incentives for business investment and the incentives and income from work.”
The Chancellor opened his 56-minute speech by emphasising the UK was not facing headwinds, but global storms, with the wars in Ukraine and particularly the Middle East driving up borrowing costs across the G7.
He revealed the OBR has said borrowing costs have risen £14bn this year, although forecasts show it will fall as a percentage of GDP in the years ahead.
Mark Kearsley, partner at DSG, said: “No showstoppers, but plenty to unpack. Founder’s Relief, EMI2, the Founders Fund and the Fund for Female Founders are all welcome measures. But the bigger challenge remains: the cost of doing business, employing people and navigating regulation is still making the UK less attractive to many would-be entrepreneurs.
“If these incentives are to succeed, they need not only to encourage people to build businesses here, but also to keep founders, investment and reinvestment in the UK.
“For Liverpool and the North West, the announcements on devolution, business rates and Littlewoods were positive.
“Capital taxes were surprisingly quiet, with the standout change being the reduction in the lifetime allowance from £1m to £500k.”
Kieran Donovan, corporate Partner and Head of Liverpool Office asked “Is this a Budget for growth, and does it give businesses the breathing space they need?”
He said: “Ultimately, businesses need confidence if they are going to invest, recruit and grow, and there were certainly measures announced today that should help.
“The announcements around energy security and reductions in business rates are welcome, as are a number of measures aimed at encouraging entrepreneurship. The EMI 2 changes, the new trading allowance and Young Entrepreneurs Allowance, together with increased support for female founders, all send a positive signal.”
