West & North Yorkshire Chamber of Commerce is backing the national Chamber body’s Budget appeal ahead of 18 March, but is not holding its breath for great things to happen.
The Chamber, which covers Bradford, Leeds, York & North Yorkshire, says that, with a General Election so close and so much uncertainty around the result, plus government finances remaining so tight, it is best not to pin hopes on ‘big’ announcements.
Both the regional and national bodies, though, are urging the Chancellor to demonstrate a long-term backing to business investment. He could start to do that, they say, by introducing a permanent Annual Investment Allowance of £500,000*. This can help to achieve better balanced growth and tackle the uncertainty created by chopping and changing of UK tax structures and incentives.
Under current plans the Annual Investment Allowance limit will return from £500,000 to £25,000 after the latest temporary extension ends on 31 December. In addition to a high, long-term Annual Investment Allowance, the BCC’s submission argues that the allowance should be widened** to include improvements to business premises, which would allow companies across the UK to boost productivity, efficiency and hiring.
The case for a long-term Annual Investment Allowance:
• The UK economy is too reliant on consumer spending, which accounts for almost two-thirds of UK GDP, to support growth. The 1.4% fall in business investment in Q4 2014, the steepest decline since the depths of the last recession, is a warning sign that much more needs to be done to promote business investment and achieve better-balanced growth.
• To meet the Chancellor’s ambition for the UK to become the richest country (by GDP per capita) in the G7 by 2030, a higher level of business investment is needed. This will be key to evaluating the performance of the next government.
• Greater stability in allowances – Annual Investment Allowance has changed four times since 2008 and is due to change again in 2016 – will help business invest with confidence.
• Introduction of a high, long-term Annual Investment Allowance will have positive exchequer impacts as a result of higher business investment, stronger growth and a robust tax base.
Andrew Lindsay, Chairman of West & North Yorkshire Chamber, said:
“Businesses are operating in uncertain times – with conflict in the Middle East and Russia and a sluggish Eurozone to contend with. Yet the greatest source of uncertainty is political and home-grown. Businesses have grown tired of constant chopping and changing in the tax system. They need long-term certainty, rather than short-term incentives, to help support investment decisions. A long-term investment allowance would give much-needed certainty. Premise improvements could also be included in the scheme as firms look to expand their workforce or enhance their efficiency. “We also need to boost business investment’s contribution to GDP, as this will help us move away from an over-reliance on consumer spending, towards better balanced growth that is sustainable in the long-term. It’s time the government acknowledged that by forgoing some tax receipts in the short term, it will reap the rewards later, as businesses invest, hire and generate bigger profits.”
*The BCC called for this in its BCC Manifesto ‘A Business Plan for Britain’, which includes a wider set of recommendations from the business community, for any incoming government in 2015.
**An ‘enhanced Annual Investment Allowance’ would specifically exclude property speculation, but would go beyond the Business Premises Renovation Allowance and flat conversion allowances that only apply in certain ‘disadvantaged areas’.