Autumn statement: tax…
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A chancellor’s budget usually come with a few surprises and unexpected carrots to get voters – or even just MPs – onside.
But when Jeremy Hunt got to his feet and outlined what he called “a plan for growth”, the majority of his policies did not come as a shock, having been splashed in the media in the days before.
There were no increases to justice spending and little directly for legal services.
But this was a budget aimed firmly at the workforce and boosting productivity, with some policies of note that could affect the sector.
So, how will Hunt meet his goal of making Britain “the most prosperous country in the world”?
Over the next three years, businesses that pay corporation tax will be able to offset 100% of their investment in IT equipment or machinery against profits to bring down their tax bills.
This will last three years, but the chancellor wants to see it made permanent when able to.
We’re exploring how law firms could be included within this relief.
For example, if your firm pays corporation tax, this may be a sensible time to upgrade computer systems, which could – alongside other measures – help reduce your risk of ‘cyber events’, and perhaps bring down the costs of cyber and professional indemnity insurance.
The abolition of the lifetime allowance means that there is no longer a limit on how much someone can accumulate in their pension before having to pay extra tax.
Aimed predominantly at slowing the number of NHS doctors retiring early, it will be welcome news for those accumulating a large pension pot.
Proving once again that imitation is the best form of flattery, the chancellor will also create 12 new investment zones across the UK, intended to follow the example of Canary Wharf.
These zones will be eligible for £80 million in funding that can be spent on tax and infrastructure incentives to attract investment.
With announcements of additional hours of free childcare, more skills support for older workers and extra help to encourage disabled people to return to work, this was chiefly a budget aimed at boosting the workforce and making the economy more productive.
Finally, support aimed at households for energy costs will remain in place for now.
The chancellor has extended the Energy Price Guarantee until June to keep household energy costs at an average level of £2,500 for a further three months.
The budget was perhaps more significant for what was missing.
There was no change to justice spending or any department outside of defence, with spending only forecast to increase in 2024/5.
The Resolution Foundation has calculated that this amounts to a 10% cut in real terms spending by 2027/28 due to inflation.
Law Society president Lubna Shuja called this budget a missed opportunity to halt the crisis in legal aid and the courts system.
More positively, the chancellor announced that the UK is no longer forecast to enter a recession this year, while unemployment is set to peak at around 4%.
Given the impact of energy price increases and pressures from inflation, that will be seen as a big win by ministers.
The lack of rabbits, carrots or other goodies suggests the chancellor is content to keep things calm after last year’s mini budget, with few extensive policy changes.
The autumn statement later this year may be the time Hunt chooses to set out a stall ahead of the general election, expected at some point in 2024.
How will the budget impact your business? Law Society partner Armstrong Watson explores the detail of the chancellor’s plans.
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