The Budget-a triangle of thoughts

In today’s blog reflecting on yesterday’s budget we’re bringing together three reflections-our CEO Dianne, our Finance Director Andrew and our Legal Director Tom who approaches this from a HR perspective.

Dianne’s thoughts

Our mission here at Britain’s Energy Coast Business Cluster (BECBC) is to create an environment for our members to do business and it struck me yesterday as I listened to Rachel Reeves delivering the budget that it’s also what we need the Government to do. So did yesterday’s budget deliver that?

I think any of us that stay informed had anticipated that taxes would rise following the election. Anyone with experience of the NHS or the roads and rail in Cumbria (and I’m sure elsewhere too) knows investment is needed. These investments also benefit businesses as they help get people back to work quicker if they have health issues and increase productivity if people can get from one place to another quicker. But Labours pre-election promises not to increase VAT, employee NI (I’ll leave the argument on whether it was just the employee element or not to others!) and Income Tax has put a heavy burden onto businesses and the problem is Labour promised growth-something businesses, not governments deliver. This budget has made delivery of that growth less likely in my opinion.

While smaller businesses have been given some protection the businesses that employ over 4 people have been hit hard and frankly they’re feeling unappreciated. This hasn’t been helped by the row over what a working person is. If a small business owner working 70 hours a week to generate the income to pay their staff wages isn’t a working person I’m really not sure what I can say. I do also fear unintended consequences where employers can only cover these costs by restraining pay rises and not investing as much in the next generation and that’s certainly what I’m hearing from our medium sized members.

So did the budget deliver any good news for the clean energy sector? I’m afraid I was once again left feeling disappointed. It feels like we got reannouncements of previous announcements and no more clarity than we had before. An energy system fit for purpose is key to growth of the economy and needs to be prioritised in the myriad of things that the government is trying to do. If we can't get reliable, affordable energy to businesses and homes we cannot build the thriving economy that we all want.

So I’m left feeling rather glum if I’m honest. I hope I’m wrong. I hope somehow productivity increases and the economy grows. I hope decisions are made to build up our energy security in the long-term. I also hope government ministers start to understand our entrepreneurs who can deliver that growth and show them some appreciation. The impacts of budgets, including the unintended consequences, often can’t be seen for some years and Labour are saying the growth they’re investing in will come in 10-15 years. The challenge to the government now is to use the money they're raising and combine it with reform of the public sector to deliver that environment for businesses to deliver economic growth.

Andrew’s thoughts

Leaked to an extent we could have been under the impression the budget was actually three months ago.

Was this master class in managing the message, or an attempt to make sure the actual day arrived, no-one could be bothered to actually pay attention?

Anyway… Rachel Reeves framed this as the budget of change, to kickstart a decade of national renewal and they would invest invest invest.

So, with more than half of the £40bn of tax increases directed at business, what should our members look out for?

The chancellor says £25bn will be raised from Employers NI, an increase from 13.8% to 15% and a change in the threshold at which it kicks in from £9100 to £5000.

This was the most anticipated (leaked) point, and the immediate focus for any business counting the cost of the budget.

Perhaps critically though, the Employers Allowance has more than doubled, from £5,000 to £10,500. This allowance is the discount a business can offset against its total NI bill, hardly life changing for a larger business, but a potential lifeline for a small business.

Elsewhere, the Business Rates discount of 75% will be replaced by a 40% discount from April, to a maximum of £110k per year, the National Living wage will rise from £11.44 to £12.21, but the main rate of Corporation Tax will remain at 25%.

But what about the Invest Invest Invest??

Well the good news is a commitment to £100bn in Capital Spending, including Trans Pennine Rail, Road Infrastructure, House Building, as well as £2bn for Hydrogen investment, including the Barrow Green Project.

That increase in Private Jet duty is going to hurt, but that’s a conversation for another day..

Tom’s thoughts

Some initial thoughts on how the Budget will impact employers and employees:

National Insurance payable on workers earning more than £5k from April 2025 (previously £9,100) with the rate increasing from 13.8% to 15%

Employment allowance for NI liability reduction to increase from £5k to £10,500

For employees:

Increase on National Minimum Wage - over 21’s will earn £12.21 an hour from April 2025 (increased from £11.44)

Increase for 18 to 20 year olds to £10 from £8.60

Apprentice rate to increase from £6.40 to £7.55

Benefits will rise by 1.7% in April 2025

A freeze on income tax thresholds but confirmation that they will start to increase again from 2028.

The changes appear to deliver the stated aim of backing workers; however, it will be interesting to see how employers absorb the increase in NI contributions. Where it is difficult for employers to pass costs on to customers, it could lead to an unintended consequence of payrises stagnating for anyone above NMW.

What are your thoughts on the budget? We’d love to hear from you via the comments on this blog.