ICSM Business News: Diesel, gherkins, tax and the £100 give away - how Chancellor of the Exchequer John Healey’s budget will impact business
By Harry Mottram: Every budget statement there has ever been is met with a mixture of jeers, cheers and the doom and gloom merchants who roll out a long list of complaints. From some of his own Labour bank benchers to the Conservative leader Kemi Badenoche rubbishing the plans the budget has not been universally praised. However, the markets generally have seen the contents of the red box as being OK. Bank shares are up slightly, guilts down slightly, the FT index flat and shares in defence firms slightly up or the same. With the uncertainties caused to the economy due to the unresolved wars in Ukraine and the Middle East and the resulting hikes in oil and gas prices, then to be charitable, the Chancellor has been cautious as we don’t know what will happen in 2027 in the energy markets. So, nothing too dramatic which is where the critics have been attacking him - essentially they say he's been too cautious. Away from the headlines the budget has an impact on business and the economy. Overall taxation is up as is spending – not unusual for a budget – while the Chancellor painted a positive spin on his plans. Nothing new there.
Energy
The one off £100 payment to households in council tax bands A-D in England will give a minor boost to household spending – always helpful for retailers in particular. And the cutting of standing charges on energy bills. Freezing fuel duty until July is welcome as it helps to plan ahead in logistics – most will agree that diesel and petrol are far too expensive – drive across the border in Northern Ireland to the Republic and diesel is 20p cheaper per litre. Only Finland, Holland and Denmark has more expensive diesel – the Baltic states charge diesel even lower than the Irish Republic. The price of diesel is one of the biggest costs to business and has the largest knock-on effect on the economy – it needs to be lower. Yes, import duties will be scrapped on food products that include gherkins – and most kitchen essentials like marmalade – but also it includes kerosene and fertilisers. And the scheme to cut electricity bills for firms that use large amounts of power will see a 25% cut backdated for energy costs this year.
Tax
Banks to pay 6% tax on their 2027 profits – up from 3%. And High Street shops will start paying business rates in England to be increased from £12,000 to £18,000 thus easing their costs as they would pay no rates on properties with a rateable value below this level. Vape shops and adult game centres will no longer qualify for certain business rates relief while gaming machines with jackpots over £1 will face higher taxes – a move which is seen as part of a plan to encourage more independent retailers back into town centres. And another measure to help High Street retailers is a plan to hit online marketplaces like Amazon, eBay and Temu by making them responsible for collecting VAT owed by sellers using their platforms.
Local Investment
There is a drive to give more central Government cash to regional authorities – mainly the elected Metro Mayors so they can spend it on housing, transport and High Streets. Healey also outlined a plan to retain business rates for local authorities by the end of 2030 plus Metro Mayors will be able to borrow more money to fund large projects such as the tram system for Bristol, Bath and Bristol Airport.
Photo from the BBC of the chancellor
Growth
Will the Chancellor’s budget aid growth – which is Andy Burnham’s watch word? Generally speaking, not really – but it won’t have the opposite effect. Borrowing is up with promises to lower it in the future – something most Chancellors announce but rarely achieve. Globally there are strong headwinds which have knocked back plans to grow the economy – from USA tariffs to hikes in oil prices which remain over $100 a barrel for Brent Crude – the accepted standard. That’s up from around $70 a barrel at this time last year. Welfare spending is always tricky for Labour Governments but there is a cross party agreement that it is too high – there are promises to incentivise more people back into work – but that is easier said than done. More apprenticeship schemes, training places, or even recruiting more junior soldiers, NHS care workers and teaching assistants is one obvious popular if expensive policy. Putting money into major infrastructure projects like Heathrow’s third runway – improved and expanded rail links across the UK – and improved road links (especially in Wales, the South West and the North of England) would all encourage business expansion. When it comes to spending money we are all experts - it's how to cut the welfare bill and redirect the savings into jobs is where the politicians have trouble finding agreement. Now it’s a question of wait and see – and whether the Chancellor’s hopes come to fruition.
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