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Autumn statement: Living Wage increase, slower growth and fuel duty freeze

Autumn statement: Living Wage increase, slower growth and fuel duty freeze

An increase in National Living Wage, regional focus and fuel duty freeze were just a few of the plans set out by Chancellor Philip Hammond in his first, and final, Autumn Statement.

Speaking in Parliament today, Hammond set out plans to tackle “long-term challenges” and Britain’s long-term future to create an economy and a Britain that “works for everyone” – as well as prepare a resilient economy in the run-up to Brexit.

He announced that the independent Office for Budget Responsibility (OBR) forecast UK economic growth at 1.4% in 2017 and 1.7% in 2018, rising to 2.1% in 2019 and 2020, before settling at 2% by 2021.

However, he added that the growth is 2.4% lower than what would have been forecast had the UK not voted to leave the European Union earlier this year. The deficit is also predicted to fall from 4% to 3.5%, reaching 0.7% in 2022.

Hammond also announced that the Autumn Statement would be abolished going forward, to be replaced with an Autumn Budget from 2017 to announce tax changes in advance of the start of the tax year, and a Spring Statement from 2018 that will respond to OBR forecasts. “We will not make significant changes twice a year just for the sake of it,” he said.

National Living Wage
As expected, Hammond announced the increase of the National Living Wage from £7.20 to £7.50 from April 2017. However, this is slightly below the £7.60 figure the OBR estimates would be necessary for it to stay on course to match the pledge of £9 an hour by 2020.

Duncan Firman, partner at Gordons law firm, said: “This increase could pose another headache for hotels and caterers less than eight months since the National Living Wage was first introduced.

“Many employers spent those first few months assessing the impact of increased staff costs and although there has been an element of restructuring, the general feeling was that the new National Living Wage was still only a small increase on the National Minimum Wage that was already in place. Now they are faced with another 30p increase from April and only time will tell the impact this will have on employers.”

Business rates
Hammond announced a new £6.7b package to reduce business rates, with Communities Secretary Sajid Javid due to announce business rates relief for other companies later today. Corporation tax is to fall to 17% as planned, and tax-free personal allowance will increase to £11,500 in April. However, the tourism VAT will remain the same, which stands at double the European Average.

Ufi Ibrahim, chief executive of the BHA said: “The government missed a wonderful opportunity to bolster hospitality and tourism – the UK’s fourth largest industry and employer of 4.5 million people – by refusing to cut VAT on tourism. It is a sure fire way to encourage more people, both domestic and foreign, to enjoy holidays here and would make the UK more competitive with our European competitors, the vast majority of whom have lower tourism VAT rates than us.”

Dermot King, chairman of the Campaign to Cut Tourism VAT said: “UK resident’s already spend £14b more on foreign holidays than is spent on tourism in the UK, and with the UK’s balance of trade deficit at around £12b the Campaign is calling on the government to do all it can to support our domestic tourism industry.”

Fuel duty
Hammond has also promised to freeze fuel duty, which had been due to rise for the seventh successive year. “In total this saves the average car driver £150 a year, and the average van driver £350 a year,” he said.

Beer duty
The Chancellor did not raise beer duty as part of his Autumn Statement. Colin Valentine, national chairman of the Campaign for Real Ale (CAMRA), welcomed the decision. He said: “Pubs are under a huge amount of financial pressure and with UK beer drinkers paying 52.2p of duty on their pint we are seeing more and more people choosing to drink at home rather than at their local. This trend not only hurts UK businesses, but is also contributing to the demise of our communities and affects people’s personal wellbeing.

“While a freeze in beer duty is welcome, CAMRA would like to see the government do more to reverse the damage done by the beer duty escalator by cutting duty in the 2017 Budget.”

Regional focus
“For too long economic growth has been concentrated in London and the South East”, said Hammond, emphasising that the gap between London and the UK’s second and third largest cities is too large. He added: “We must drive up the performance of the other cities.”

He announced funds for local enterprise partnerships (LEPs) between local authorities and businesses with an allocation of £1.8bn from the Local Growth Fund to the English regions, including £556m to Local Enterprise Partnerships in the North of England, £542m to the Midlands and East of England, and £683m to LEPs in the South West, South East and London.

He also announced a new ‘city deal’ for Stirling, and a tax break for small businesses in rural areas worth up to £2,900 per year by increasing the Rural Rate Relief. 

Broadband
Hammond pledged £1b for broadband and 5G, adding that the government will offer business rates relief on new fibre infrastructure from April.

National Insurance
Employee and employer National Insurance thresholds are to be equalised at £157 per week from April 2017.

 

Following the announcement Rob Payne, CEO of Best Western Great Britain, commented:
 
“The increase in National Living Wage from April will help make the hospitality industry more attractive which we welcome, but it also adds to the price pressures that hotel owners are already feeling and once again comes without a roadmap for future increases which our members tell us they need to help budget with confidence. 
 
“Our members are also concerned that the well intentioned increase in the National Living Wage could end up backfiring as businesses across the hospitality and tourism industries are either forced to pause investment, reduce training and development opportunities for existing staff or worse still, reduce headcount in order to absorb the additional costs. We do not want to see any of that happen.
 
“To help avoid those scenarios the government could support the fourth largest industry in the UK by cutting Tourism VAT from 20% to 5%*. This would allow hospitality and tourism businesses to continue to train and recruit more people, to grow our vital industry and to make Britain more competitive and more attractive as a place to visit at a time when we need to be seen to be open for business and welcoming to everyone.”
 
* A reduction in the rate of tourism VAT to 5% will stimulate investment and consumer spending and contribute £4.2b to the Exchequer over 10 years.

A cut in VAT could plough billions into hospitality sector >>

Chancellor sets out plans on apprenticeships, business rates and school meals >>

Autumn Statement: Hospitality industry positive despite no VAT cut >>

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