In days gone by, the UK Chancellor used to spring surprises and like magicians, pull rabbits out of hats on budget day. Commentators would be hunting high and low within the myriad of papers to see what golden eggs they could find. Nowadays everything is leaked beforehand or hidden in plain sight.
Grant Thornton Director, John Shenton (pictured), shares his views of the latest UK Budget announcements.
No more anticipation – social media has killed the budget in the same way as health and safety has killed the Easter egg hunt…. it is now all a little bit dull.
What did Jeremy Hunt actually have to say that affects us in the islands? To quote that learned magician Paul Daniels: “Not a lot”.
The messaging around the energy price guarantee, freezing of fuel duty, helping carers, childcare provision and trying to get people back into employment were all released early. The aging population is a huge concern as is the fact that voluntary inactivity rate is growing.
The age dependency ratio in Jersey and Guernsey is already higher than in the UK
The UK inactivity rate is currently significantly higher than in the best performing OECD comparators. The islands should be wary of this especially as the age dependency ratio in Jersey and Guernsey is already higher than in the UK. Action is needed across both islands to either grow the workforce (preferably the private not public sector) or reduce costs (hopefully both), but I suspect that this will simply take the form of an expensive glossy consultant’s report and some fanciful tricks involving smoke and mirrors.
Rise in corporation tax
The rise in corporation tax will go ahead as planned – this will affect us, but we already knew that.
The forecast of inflation reducing to Q4 2023 to 2.9% then to 0.9% in 2024 and to remain near 0.0% until mid-2026 seems a little optimistic, as do the public service efficiencies (ringing any bells locally?).
NHS funding and education
Old statements concerning NHS funding and education were regurgitated with a fresh spin as were the promises about delivering growth and taking decisive action.
A Budget would not be a Budget if the Chancellor did not mention tax avoidance and the Government will double the maximum sentences for the most egregious cases of tax fraud from 7 to 14 years and will consult shortly on the introduction of a new criminal offence for promoters of tax avoidance who fail to comply with a legal notice from HMRC to stop promoting a tax avoidance scheme. This is somewhat old hat.
Besides attacking tax avoiders again (though the focus very much on schemes and not the offshore islands) there were some interesting initiatives. These however were aimed at onshore businesses and will have little or no impact locally. The super deduction for plant and machinery has been extended for a further three years and R&D investment Annual Investment Allowances was also prolonged.
For older workers, the lifetime allowance will be abolished over time and the annual allowance increased.
VAT has been tweaked in certain areas and more reliefs announced. To try and tap into the more creative sectors the Artificial Intelligence Challenge Prize was announced. There is help for certain regions and lots of talk about simplification and transformation. Basically, the go to words when you have nothing to give away.
Lastly there were however special initiatives for potholes and swimming pools. However, given the size of some of the holes maybe it is the same initiative!
Grant Thornton will perform a more comprehensive analysis but for now, little for the islands to be concerned about.
Conclusion
Time will tell whether the promises made by the Government in the UK, and locally, will provide much needed support for the economy and the population or is it just sleight of hand or a magician’s misdirection. At least magicians tell you up front that they are deceiving you.
