While the Autumn Statement is often seen as a political “off-Broadway” performance compared to the relative “Hollywood blockbuster” of the March Budget, this time around all eyes will be fixed on George Osborne to see where he might hit them in the pocket.
The chancellor’s plan to reform tax credits as a way to help balance the country’s finances was well and truly scuppered by the Lords and the first time in 100 years that the upper house had voted down a financial package backed by MPs in the commons.
It sent Osborne back to the drawing board with a flea in his ear, and the challenge to find another way to reform tax credits and secure the money the country needs to make sure our economy is safe.
The danger is, even if the chancellor finds a way to make his welfare reforms acceptable to those in ermine-trimmed robes, it is likely that he’ll have to look at other places to make up the shortfall and that, of course, could include business.
Far from wanting to bite the hand that feeds him, Osborne knows how important to the economy business is – after all, we were the fuel that powered the country’s economic engine, which drove us out of recession. However, it is unlikely that the business community will go unscathed.
For example, whether it’s changes to Entrepreneurs’ Relief or the raising of insurance premium tax, the chancellor has options, but any restrictions or increased taxes will hamper growth.
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From my perspective, I have real concerns that an easy target for Osborne will be to put up the cost of fuel. It has been forecast by the Centre for Economics and Business Research (CEBR) that by restoring inflation-linked rises to fuel will cost diesel drivers £7.9bn up to 2020.
The fuel bill for my fleet of 250-odd vans, bikes and cars is already well over a million pounds a year, and hiking up that cost will have an impact on my business as it will every other firm that relies on vehicles to operate. As I’ve said before, you can’t expect a plumber to carry all his tools and equipment to a job on the London Underground!
The CEBR also reckons that the lower oil prices had freed up £12bn, creating 120,000 jobs and providing an extra £1.3bn in corporation and income taxes. While I’m not convinced that the halving of the cost of a barrel of oil has properly trickled down to the pumps on the forecourt it shows that fuel prices don’t have to be raised to deliver a decent tax take for the Treasury.
Osborne has a tightrope to walk when he delivers the Autumn Statement, but he has proven adept at keeping his eyes fixed on the economic prize that will see him over the abyss.
But we know, in doing that, he will have to make tough decisions. Hopefully they will not hurt too much the job creating, revenue generating, tax-paying business community that has been so important in getting the country back on track over the past few years.
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