What can we expect from Healey’s first Budget? – Daily Business

John Healey: business support promised

Chancellor John Healey is promising a budget that will give “breathing space” to households and businesses alike amid calls to take tough decisions that will significantly reduce public spending.

The statement on Wednesday is expected to underpin Prime Minister Andy Burnham’s aim to spread wealth across the UK and help small businesses, while cutting household bills.

Mr Healey is likely to announce cuts in regulatory requirements, including green levies, while there will be a commitment to more spending on defence and raising taxes paid by banks which will report big profits over the next two weeks.

However, the PM and chancellor have been warned that the government is failing to grasp the “precarious” fiscal position facing the country and must tackle soaring borrowing costs by cutting public spending.

Andy Haldane, a former economist at the Bank of England, described plans to raise taxes on the banks as “penny wise, pound foolish” and sent a broader economic message that if businesses make profits “the taxman cometh”.

Mr Haldane, who turned down an invitation to become one of Mr Burnham’s advisers, told The Times that the journey to growth is by unlocking the “animal spirits” of the business sector with a smaller state and lower taxes “and that means lower government spending and tough choices.”

The government’s commitment to helping enterprise also suffered a setback after Alex Depledge, the Treasury entrepreneurship adviser, announced she is resigning, claiming that start-ups were being treated as a “sideshow” and must not be pushed to the “margins of economic policy”. She is due to leave the day after the budget.

She told The Sunday Times: Entrepreneurship can’t be seen as a good news bonus on the margins of economic policy. That mentality is really dangerous for British business as a whole because it puts a cap on our ambition and it erodes confidence at every level — from investors and founders, from the media discourse, right through to workers.”

Her comments came after the Chancellor said he would be supporting “bloody-minded” entrepreneurs. He has shown a willingness to listen to concerns about the cost of doing business.

There are expectations of more business rates relief – which should trigger a response from the Scottish Government as this is a devolved area – and new funds to support smaller companies and growth sectors. The Financial Times has reported that an additional £20.4bn will handed to the National Wealth Fund and and the British Business Bank, with some of it used to back defence companies.

There will be more support for advanced technologies such as AI, biotechnology and robotics, with a focus on raising productivity in the public sector, including the National Health Service.

Pension funds may get further encouragement to invest in the UK’s private sector economy, while there is speculation of the increase in the state pension age to 68 will be brought forward. There may be changes to dividend taxes on shares.

The Chancellor has ruled out an increase in capital gains tax but the price for that may be no help with, or even eradication of Business Asset Disposal Relief (BADR) — previously known as entrepreneurs’ relief.

After the Energy Secretary Miatta Fahnbulleh approved the Jackdaw gas field, Mr Healey is under pressure from the oil and gas sector to replace the Energy Profits Levy with the Oil and Gas Price Mechanism which is based on revenue.

Rabbit out of the hat?

Chancellors like to end their budget statements with a surprise announcement that will grab the next day’s headlines. What might Mr Healey be considering?

A further cut in VAT remains a key demand, particularly from the hospitality sector (likelihood 5/10)

Tweak the changes by his predecessor Rachel Reeves, to National Insurance Contributions. This would most likely involve raising the thresholds that would ease the cost of employing staff (likelihood: 7/10).

A cut in alcohol duties. The case has been made by the Scotch Whisky Association that lower taxes leads to higher returns. If the PM and Chancellor want to raise the nation’s morale an across the board cut in alcohol duties might be just the tonic (likelihood: 5/10).

Extension of fuel duty relief and changes to the pay-per-mile tax on electric vehicles. The Chancellor may also delay the ban on the sale of petrol vechicles. The UK car manufacturing sector expects help to fend off competition from China (likelihood: 8/10)

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