UK Government energy bills and tax announcements cheer businesses
Energy bill cap and reversal of NIC rise give much needed help for Fife’s businesses
The UK Government made some significant announcements last week that will, in the short run at least, help Fife companies cope better with the cost of doing business crisis that is impacting so many of them. The Government announced its Energy Bill Relief Scheme that will limit the rises that businesses will see in their energy bills for six months, starting in October. It subsequently said that the 1.25% rise in Employer National Insurance Contributions that the previous Government applied will be reversed from November. It also announced that the planned 6% increase in Corporation Tax, due to take effect next April, will no longer go ahead. These measures will automatically apply in Scotland but three other measures they announced do not: a reduction in the basic rate of income tax to 19p; the scrapping of the 45p top tax rate; and a reduction in Stamp Duty on house purchases. Income tax and stamp duty rates in Scotland are set by the Scottish Government.
Commenting on the announcements, Alan Mitchell, Chief Executive of Fife Chamber of Commerce, said:
“Businesses will be relieved to know that the cap on energy prices will limit the extent to which their energy bills will rise in the coming months. This announcement doesn’t mean that bills won’t rise and in many cases by a significant amount, but it does mean the increase in energy costs that businesses will have to absorb will be much lower than would have been the case if the Government hadn’t acted. They should get some credit for what they have done but they have not gone far enough. They are still insisting that the cap will only apply for six months, after which continued support will only be continued for the most vulnerable businesses. This is the wrong decision. The cap should apply for two years for every business, like it does for every household. That’s only basic fairness. There is no justification for treating businesses differently than households: rising energy costs are causing the same pain to both, and we will continue to work with our partners in the Scottish Chambers of Commerce and the British Chambers of Commerce to persuade the UK Government to extend the cap.
“The decision to reverse the Employer NIC increase is very welcome. It should never have risen in the first place. The Government increased it to generate extra income for the NHS and social care. A very worthy objective but NIC was the worst possible way to raise the money. It is a brake on ambition, growth and jobs, and we are absolutely delighted that the new PM and Chancellor have taken this decision.
“The announcements on income tax and stamp duty will not have the same immediate impact on business fortunes in Scotland as the other tax changes, but they will still have an impact. If the tax rates change in England and rates in Scotland remain the same, people working in Scotland and purchasing property in Scotland will have a higher tax bill and potentially less money to spend. Higher Scottish tax rates may also deter people from living and working in Scotland, much more feasible with the hybrid/online working model that is so common now, and the last thing that Scottish businesses need is more obstacles to recruiting and retaining staff. The Scottish Government will be announcing its own budget plans soon. They have an important decision to make, the outcome of which could have big consequences.”