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Spring Statement 2019 - initial thoughts

Today, the Chancellor of the Exchequer, Philip Hammond, presented his Spring Statement to Parliament.

Our Tax Partner, Paul Brown watched live and had this to say:

"at least, as far as the Spring Statement 2019 is concerned, no-one could accuse Philip Hammond of not being a man of his word. When he announced the move to a full autumn Budget he stated that the Spring Statement would not be a full fiscal event and certainly, from a tax point of view, he was as good as his word. The Spring Statement was pretty much a non-event and for those of us used to desperately clicking through huge lists of Budget announcements in the middle of March, this is something of a shock to the system.

Of course, this is hardly surprising, given the timing of the speech being sandwiched between the rejection of the proposed exit deal with the EU and the vote on the potential for “no deal”.

Indeed, Mr Hammond used the platform to make it very clear that the current uncertainty was damaging the economy and that a no deal exit from the EU would cause significant disruption in the short to medium term. 

A no deal exit would, Mr Hammond said, leave the UK economy smaller than it would be in the case of a deal.  He went as far as to say that any suggestion there was an easy fix to the adverse impacts of a no deal scenario is flat out wrong.  He did though reiterate the view that if and when a deal is agreed there will be a “deal dividend” as business confidence returns – though whether this “dividend” is simply the economy returning to a more normal state is not entirely clear…

The big announcement of the day came much earlier than the speech.  In the event of a no-deal, the majority of Britain’s imports will be tariff-free under a temporary arrangement to ease the transition. This would represent an increase in tariff-free imports from 80% by value at the moment to around 87%. 

Currently, 100% of imports from the EU are of course tariff-free, however, under the no deal arrangements, this will fall to around 82%, while 92% of imports from the rest of the work will be tariff-free, up from 56%.  While farmers producing meat will continue to benefit from some protection against imports as tariffs remain, other sectors such as eggs, cereals and fruit and vegetables will lose the current tariff protection against cheaper imports from outside the EU.  Of course, all of this is academic if there is, in the end, a deal with the EU.

There were a number of measures that the Chancellor was keen to point out were key to driving up wages.  There are further plans to review the impact of the minimum wage on employment and productivity, along with a statement the government will look to be positive in considering future increases to the national living wage.

There is also to be further, if limited, investment in innovation and technology.  The proposed new digital services tax affecting global tech giants will also be supported by a review of the regulatory regime for the digital economy.  The aim is for tech giants doing business in the UK to be on a more level playing field with local businesses, and to pay their way in tax.

Some help for smaller businesses may come from the previously announced business energy efficiency scheme.  There is also to be a requirement for the audit committees of larger businesses to review the companies’ payment practices and report on them in the annual accounts.   Whether this “stick” is sufficient to address some of the bad behaviours larger companies exhibit in delaying payment to small suppliers remains to be seen.

Normally the relevant Treasury papers are published as soon as the Chancellor sits down.  On this occasion the speech was so short (maybe 35 minutes or so) that there was quite a delay before the papers came out – maybe the treasury boffins were caught on the hop!  Overall then not a great deal to stir the soul of the average tax adviser – but I think it is fair to expect something on the lines of an emergency Budget if we do end up leaving with no deal at the end of March.  If that is the case, I suspect there will be more than enough to keep me interested!

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