Business leaders today said the Chancellor’s plans for an apprenticeship levy marked a “significant extra payroll tax” on firms.
George Osborne said the levy, to be introduced in April 2017, will be set at a rate of 0.5 per cent of an employer’s wage bill.
He said: “Each employer will receive an allowance of £15,000 to offset against their levy payment. This means that the levy will only be paid on any paybill in excess of £3 million and that less than 2 per cent of UK employers will pay it.”
However, CBI director-general Carolyn Fairbairn said: “Business recognises there are tough choices to be made in balancing the books, but many are reaching a tipping point, where the cumulative burden of the living wage, apprenticeship levy and business rates risk hurting competitiveness.
“The apprenticeship levy, set at 0.5 per cent, is a significant extra payroll tax on business and by widening the net it will now catch more smaller firms. We welcome the creation of a levy board to give business a voice on how the money is spent and will work with the government to ensure a focus on quality.”
Andy Willox, the Federation of Small Businesses’ Scottish policy convenor, said small firms north of the Border were facing a “lorry load of change” in the wake of the UK government’s plans.
While welcoming Osborne’s decision to scrap cuts to tax credits for millions of low-paid workers, Willox said: “Firms in important Scottish sectors will still be worried about the aggregate impact of upcoming changes to the national minimum wage and the introduction of compulsory workplace pensions.”
The Chancellor also set out investment of “at least” £250 million over the next five years in an “ambitious nuclear research and development programme” aimed at reviving the UK’s expertise in nuclear technologies, paving the way towards building one of the world’s first small modular reactors in the UK next decade.
Fiona Reilly, head of nuclear energy at PwC, said the pledge to double the UK’s spending on energy research was “welcome news to the nuclear industry and an important development for the country’s energy mix”.
She added: “The commitment to invest in small modular reactors is also of great significance to the UK’s engineering and manufacturing industries which, it is envisaged, will be significantly involved in the development of these technologies.
“Small modular reactors will provide greater flexibility for the nuclear industry to play its role in both the climate change debate and a safe clean supply of energy.”
Nancy Curtin, chief investment officer at Close Brothers Asset Management, said Osborne may have “loosened the purse strings” in terms of defence spending and investment in housebuilding, “but he is also fully aware that he is not making as great inroads into the deficit as he would have liked”.
The Chancellor told the House of Commons that the deficit is to be 3.9 per cent of national income this year, then 2.5 per cent in 2016-17 and 1.2 and 0.2 per cent in subsequent years, before moving to surplus of 0.5 per cent in 2019-20 and 0.6 per cent the following year.
Curtin said: “It is clear there are further cuts to come. This is a key reason why the prospect of interest rate rises has become more distant in the UK. While the deficit is being addressed by Osborne’s ongoing fiscal tightening, the economy’s expansion is being supported by looser monetary policy from [Bank of England governor Mark Carney].
“The UK’s economy is in a vastly different place from the US. Yes, both economies are showing decent underlying fundamentals, such as rebounding labour markets, but policy is diverging. While the US can afford to loosen fiscal restraints, which in turn sets the scene for monetary policy tightening, continued austerity in the UK means we can expect monetary policy to remain more accommodative.”