George Osborne's Spending Review and Autumn Statement gets mixed feelings from the industry.
Yesterday’s announcement from Chancellor of the Exchequer saw the total Government spending rising from £756bn this year to £821bn by 2019-20.
With mixed measures directly aimed at the manufacturing industry, the most influential decisions taken by Osborne regard tax credits, the allotted budget for scientific development, the apprenticeship levy and the extension of business rate relief for small businesses.
Against previous speculations, the announced tax credits have been ruled out in favour of universal credit.
The Science budget has been bumped up to £4.7bn to favour business and development, but the most striking blow to UK manufacturing saw the Department for Business, Innovation and Skills’ budget being cut by 17% – with the likelihood for further cuts for education.
Commenting on the measures, Carolyn Fairbairn, CBI Director-General, 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 new apprenticeship levy of 0.5% on company payrolls is estimated to raise £3bn a year and fund three million apprenticeships, the chancellor has claimed.
The new charge, which is set to start in April 2017, has been described by business groups as a new “payroll tax”.
Sceptical on the measure is Chris Greenough, director of Salop Design & Engineering: “Large employers in the UK will have to pay an “apprenticeship levy” amounting to 0.5 per cent of their total wage bill to encourage large companies to offer quality training to young people. But 98% of employers will not pay – so does this encourage all employers to look to training to close the skills gap?”
Further doubts have been raised by James Selka, MTA CEO: “[…] the size of the apprenticeships levy, at 0.5% of payroll for all firms paying more than £3million, is a significant cost and manufacturers will need to be convinced that the gains, in the form of better training provision, will be worth it.”
Clashing with the raise of the science budget are the cuts to the Carbon Capture and Storage (CSS). Despite the environmental tariffs exemptions for big energy users (like the steel and chemicals industries), there are those who fear the lack of funding could be detrimental to the UK.
“The cuts to the UK’s Carbon Capture and Storage (CCS) funding are extremely disappointing, whilst we understand that government has had to make some extremely tough decisions, this one is not in the long term interests of the UK economy or energy consumers,” Claire Jakobsson, Head of Climate & Environment Policy at EEF, said.
Pleased with “The Chancellor’s enthusiasm for an industrial strategy” is instead Terry Scuoler, chief executive of EEF.
As Osborne’s decision to continue supporting Catapult centres as “successful incubators of new business ideas and product development”, he is confident the Chancellor “will give industry confidence and encourage many innovative companies to push ahead with the next generation of business ideas.”