Category: Business

Whilst the world has seen many pandemics, the UK like so many other countries around the World has watch from a distance without adequately preparing for the impact that such an outbreak would have here.

Sadly of course the UK has been hit hard, and wasn’t very well prepared, we were slow to test and even today flights are arriving at Heathrow from Italy and the USA and there are no scanners or even basic questions about if travellers are infected or not. So it seems the UK has a lot of lessons that it is finding hard to take on board.

The NHS has done a great job or rather its front line staff have, but again this pandemic shows high lumbering and inefficient the UK health service is. The economy has had to be shut down because of worries that the NHS is unable to cope should infection rates get out of hand.

Hopefully lessons will be learned, but these will be very painful, at the cost of 10,000’s of good companies that would otherwise have grown and developed, but now will be out of business.

The travel and hospitality sectors have been increbible hard hit, and really good people are suffering all as a result, though of course travel requires international locations to also be clear.

Hopefully some positives will come out of this, more people will work from home and cut down the use of public transport, with all its now all too obvious health risks.

This years budget will be a really interesting one, now the Conservatives have their well deserved majority they can afford to be radical, also the first budget of a new administration is often seen as the time to push through unpopular tax rises, whilst towards election time things need to be less radical and more popularist.

I support Boris and I know his instincts are for big capital spend items, such as the bridget between Scotland and Ireland, I also know he will want to be seen to deliver for the new MP’s he has in the Midlands and North of England.

So what do I expect?

Well big increases in spending on projects for one.

HS2 will most likely go ahead.

Environmental spending, here I am expecting a VAT increase on Fossil fuel, Gas for example is currently 5% that could rise to 20% making it much more attractive to use companies offering renewable sourced electricity instead and taxing that at 5% instead that would put further pressure on the move to renewables.

Levelling up the country has been mentioned a lot, so I think that means soaking Labour London with tax increases to pay for spending in the midlands.

Pension are under threat again, I really hope that is left alone, as we need to be driving up the % of incomes that are invested into the country and for people’s retirement.

If the higher rates of income tax are reduced or the starting point for the 40% then that is different, I really hope that is planned.

Rumours are often circulated intentionally only not to be included in a budget, which then gives a sense of relief which covers over the real intention which is to raise taxes!

Well I can’t believe it but Brexit has finally arrived, any how easy it was once the Brexit blockers were removed from Parliament, I don’t think those selfish MP’s spared any thought for the economic damage their dithering caused last year. The whole point of Parliament is for it to represent the will of the people, not to twist and resist it at every opportunity.

Anyway I take my hat off to Nigel Farage who has driven this whole agenda for the last 20 years, and what a stunning victory for Boris Johnson, without him we really would have been lost, but his popular charm brought victory and with that a majority enough to drive all of this through.

I expect trade negogiations to be straightforward, the EU can’t and won’t offer everything we want but its in their interest to agree to a free trade deal, as we are one of their largest export market.

Boris is also 100% on the money with his plans for Infrastructure spending, the Midlands and North of England really need it after decades of Labour under investment, so HS2 and possibly a bridge between Scotland and Ireland will be a fantastic boost to the economy.

I really hope for a budget with a long term plan to reduce income tax, particularly the abolition of the 45% rate and reducing both the starting point and rate of the current higher rate 40% – we need the £80K starting point Boris mentioned in the pre-election period and a lower actual rate, maybe 30% or 25%, though I accept this can’t happen in a very short time scale but if we move in that direction, the economy and country will really be transformed, to become the economic powerhouse we always used to be.

At the time of writing this blog post which is towards the end of January the UK is just shrugging off the impact of the brexit logjam we all experienced last year. Our previous parliament tried and tried to block brexit going through but in doing so the confidence of the country took a real hit. It was so irresponsible of our politicians at that time not to consider the impact of their actions on the whole country.

Business stopped invested, people stopped spending. But the clear election result has changed that and now in this new decade there is a realisation up and down the country that we are in a new place, there is renewed optimisim, a sense of determination to get through things and make a success of things in 2020.

We already have the great announcement of the rise in the living wage to £8.72 and the intention to rebalance Government spending to better benefit the midlands and the North.

Pensions

What I would really like but don’t expect is an announcement of higher auto enrolment contributions for both employers and employees, I expect there will be a body such as the low pay commission setup to report back each year and make recommendations, that is a good idea but is going to take time. To tackle long term pensions and poverty in old age we need contributions going in to pensions for everyone sufficient to give a replacement income of around 60%.

At the moment, there is a lower earnings and an upper one, the lower is being abolished from the mid 2020’s but no date yet, we need the same for the upper one. Self employed are not within the scope of auto-enrolment but need to be. The correct level of contributions is something in the order of 12-16% of total earnings, whilst actual contributions are 8% of a band of earnings. So a long way to go. Increasing both employers and employee rates to 6% phased over 3 years would be a huge step forward, announcing that now would allow businesses and individuals to plan ahead.

By doing this we can abolish in work and in retirement poverty, of course pensions are long term investments but every day now as people retire they have a small but growing auto enrolment pension which they didn’t before. Due to the increases in contributions last year that is now growing faster, as every month passes that expected pension grows a little higher.

Income tax

The next big issue that is holding back our entire country is the excessive level of income taxes, Boris made a bold pledge to raise the threshold for the higher rate to £80K from £50K that is exactly what is needed, to remove a large swathe of middle class income from the higher 40% rate.

For me this budget is a golden opportunity to change direction on tax, the chancellor should declare that our direction of travel is now towards lower rates and higher thresholds. If I was Chancellor I would be announcing:-

• Abolish the 45%
• Increase the starting threshold for 40% in stages from £50K to £80K
• Reduce the % for the higher rate starting now reducing to 38% with a target of 30%
• Aim to reduce the basic rate to 15%

That really would set the hares racing and restore competitiveness to our country.

I sense Javid and Boris are both bold men with the right ideas so I am very hopeful that announcement along these lines will be forthcoming, it really will be interesting to see if they grasp the golden opportunity which their majority offers them and the potential to get that through whilst labour is in such disarray.

Bio –  Adrian is the CEO of our sister site Reporting Accounts a local politician and chartered accountant.  He contributes to many website about Business Intelligence.