Budget 2021 saw the chancellor announce what he called ‘the biggest single year tax cut to business rates in over 30 years.’
Sunak rolled out a 50% business rates discount especially for companies in retail, hospitality and leisure sectors. A 12 month rates relief was introduced for new business so they could invest in their startup. And in an effort to boost personal incomes, the National Living Wage also rose from £8.91 to £9.50 an hour.
‘Levelling up’ is the current rallying cry from the government. But with the Omicron variant, Brexit, and soaring inflation, what should we expect from the Budget in 2022?
Business founder Reuben Singh (alldayPA), says it’s time for the government to deliver on their promise to ‘build back better’.
“There’s a difficult balancing act and we appreciate that.” Singh states, “Everyone knows that the financial costs of Covid have been huge, from furlough to vaccines and the decline in GDP. The current situation with inflation at a 30 year high driven by energy costs, supply chain issues and much else makes things more challenging.
Steve Witt is co-founder of award-winning Not Just Travel and its sister arm The Travel Franchise. He predicts the main theme of this year’s budget will be the Government trying to ‘mitigate inflation’ but not adding tax to already rising costs. “Tongue-in-cheek, if the No10 garden party fiasco continues, the Budget will be good for everyone – because they will be trying to keep everyone sweet.”
Head of the School of Digital Finance at Arden University Hassaan Khan believes the rising costs of living will be addressed. “The Chancellor is expected to announce a number of changes in the March budget, some of which should help to avoid further pain for households already reeling from above average increases to the cost of living.”
Despite a manifesto pledge that ruled out tax hikes, the UK government did exactly that in 2021. Employees, employers and the self-employed will all pay a 1.25% increase in 2022. While NI rates are set to return to 2021 levels in 2023, could we be facing fresh tax hikes in other areas?
Khan suggests that the duty freezes imposed in 2021 may continue. “On the taxation front, we can expect to see a freeze on fuel duty, previously announced for 2022/23 being extended into 2023/24 – while there will likely be a reform to alcohol duties following a one-year freeze announced this time last year.”
He also believes this extends to business rates. “We can expect to see business rates relief for hard-hit hospitality and leisure businesses up to 2024, with a freeze to the business rates multiplier in 2022/23. Changes to air passenger duty will likely be announced, with lower rates for domestic flights and higher rates for those travelling long haul.”
Witt seconds Khan’s take on travel duty. “Inflation is rising rapidly, so the government will be looking at options to help towards the cost of living. I can’t imagine there will be a rise in airport tax (Air Passenger Duty etc) or anything like that, as it would really hit the industry. They want to get people travelling and that’s their way of helping. We are not going to see big increases in things like tax on alcohol, because that will hit the hospitality sector, and like travel, the Government doesn’t want to impact it further after a rocky couple of years.”
But will these measures be enough? Singh accepts that taxes need to be paid for the economy to recover. “It’s businesses that will drive us forward and we need support for that. 2021 was a mixed bag for businesses. Whilst we welcomed Covid support measures, and incentives (such as the capital allowance ‘super deduction’ and some minor changes to the business rates regime), there were some significant measures that affect costs and profitability, ranging from the increase in corporation tax to the social care levy.”
Ultimately, it remains to be seen whether the Chancellor will extend, remove or alter the relief that’s currently in place.
The business rates relief and duty freezes have been a much-needed lifeline for companies. But with energy and food bills growing at an alarming rate, will there be support for workers?
“The government sees inflation is rising rapidly and that’s hitting people’s purses” Witt explains, “so they will try to offset that. This means disposable income will remain about the same.” He goes on to add that holiday bookings are currently through the roof – an indication that people are still willing to splash the cash on leisure. “Our sales are outperforming the industry. The average booking value for us was £5,000 – so people are spending more.”
Khan also rules out further cuts on personal income. “Changes to Universal Credit will reduce the amount that is taken away as earnings rise. For lower earners, there will be an increase in the National Living Wage for those aged 23 or over, and the National Minimum Wage rates for under 23s and apprentices.”
He goes on to say, “I would also expect a highly-anticipated review of public sector pay. This could provide a lifeline for many workers across the sector – given the increasing cost of living and rising prices on household essentials such as food, fuel and energy bills.”
For Singh, the cost of living crisis must be dealt with in the Budget. “For 2022 we want to see something that alleviates pressure on household budgets. Tax rises and inflation – especially fuel costs – could depress the demand for goods and services.”
The Chancellor should also tackle the ‘Great Resignation’ and skills shortage, Singh suggests.
“As an employer we see costs rising and find recruiting good, well-educated staff to be a problem. That’s a long term issue that the UK needs to address if we’re to remain competitive and close the productivity gap. Anything that encourages investment, in people and technology, would be welcome – as well as a fair, simplified tax regime.”
The Conservative Party has made reaching net zero by 2050 a key energy policy. In their 2019 manifesto, they pledged to tackle deforestation, establish a Blue Planet Fund, and cut C02 emissions through partnerships with the private sector.
“When it comes to the environment,” says Khan, “we can expect to see an increase in sustainable, renewable energy projects, as well as a range of measures to be outlined to support the Government’s aim to reach net-zero greenhouse gas emissions by 2050. I would also expect the government to reconfirm its target of a 46% cut in emissions by 2030.”
But if climate change didn’t feature in last year’s Budget, how much should we realistically expect to hear on the subject?
“The chancellor has a real challenge.” Acknowledges Singh, “Kicking climate change into the long grass is absolutely the wrong thing to do, yet the chancellor failed to mention anything in his last budget. We need long term investment. We must invest in social care and education, and we can’t ignore our commitment to net zero.”
So – will we ‘build back better’ in 2022? As with all things, it remains to be seen. One thing is certain: if the government truly wishes to ‘level up’, it’s time to put their money where their mouth is.