Intelligence Briefing 16th March 2016

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In this issue: Weekly Focus – Budget Statement 2016 | EEF discusses immigration policy with Home Office Minister | In Parliament | Week in Review | The week ahead | Blogs from this week

Weekly Focus – Budget Statement 2016

Key measures

Apprenticeship levy

There was little additional information announced on the apprenticeship levy. The Budget revealed plans to top up employers’ levy contributions in England by 10%. This will increase the amount in employer’s new digital accounts. There was no detail on how the government will fund those out of scope of the levy, or what the funding caps and rates will be. Also, the Budget stated that operational guidance on the levy model and digital system will be published in April, but draft (not final) funding rates will not be published until June.

Business Energy Efficiency Taxation Review

The Budget provided the Government’s official response on the Business Energy Efficiency Taxation Review. The key decisions were: the CRC Energy Efficiency Scheme will be scrapped from 2019-20; the Climate Change Levy (CCL) will increase from 2019-20 to recover the CRC revenue; the Climate Change Agreements (CCA) will continue to at least 2023 but a review will be conducted this year looking at targets and penalty fees; the levels of CCL discount available from CCA participants will be increased to ensure no absolute increase in energy costs; and The Treasury will amend the current “imbalance” between CCL charged on electricity and that charged on gas. There was also a commitment to continue the Carbon Price Support Freeze for a further year to 2020-21.

Business rates

The Chancellor announced that Small Business Rate Relief will be set at 100% permanently from April 2017 with thresholds increased, effectively exempting businesses with rateable values below £12,000 from paying any business rates in the future. From April 2020 business rates will be increased by CPI and not RPI. The Government will also consult on increasing the frequency of property revaluations from 5 years to 3 years and in Summer 2016 on devolving full retention of business rates to local authorities.

Business Tax Roadmap

The corporation tax rate will be lowered further, to 17% in 2020. There have also been some changes to interest rate deductibility and losses carried forward.

Pensions

There were no changes to pension tax relief. Instead, the focus was on developing new saving vehicles for individuals. In particular, from 6 April 2017 any adult under 40 will be able to open a new Lifetime ISA.

Overview of economic and fiscal forecasts

The Office of Budget Responsibility’s (OBR) forecasts for UK growth were revised down to 2% in 2016 (fourth-tenths of a percentage point lower than in the Autumn Statement) and to 2.2% in 2017 (three-tenths of a percentage point lower). The downgrades were driven by a weaker outlook for global growth and trade, and productivity growth. The forecasts for business investment, net trade and private consumption were revised down. Consequently, the fiscal outlook has deteriorated since the Autumn Statement. However, the resulting £3.5 billion of additional spending cuts have been back loaded to the end of the parliament. Yet the budget balance is still expected to return to surplus in 2019-20. Public sector net borrowing as a proportion of GDP is now higher than previously for every year until 2018-19. The government’s debt-to-GDP ratio is now expected to rise this year, before falling every year in the remainder of the forecast period.

For more information contact Zach Witton, Deputy Chief Economist

EEF discusses immigration policy with Home Office Minister

This week, EEF accompanied Lord Soley to a meeting with Home Office Minister Lord Bates, to discuss immigration policy, particularly focusing on the impact the government’s policies are having on manufacturing and engineering companies.

We discussed the proposed Immigration Skills Charge (previously known as the non-EEA apprenticeship levy, until the wider UK apprenticeship levy was announced). With the costs to business building up, we called for the Immigration Skills Charge to be scrapped. We also called for greater flexibility for Intra-Company Transfers, and in particular for government to consider extending the maximum duration of long-term ICTs. We raised concerns around the recent proposals to increase the qualifying period for ICTs from 12 months to 2 years.

The Minister was very interested in case studies of companies that engage with, and get frustrated with, the immigration system. While it is unlikely we will see any fundamental changes to immigration policy over the course of the Parliament, the government is supportive of trying to get the current system working better for employers. If you experienced difficulties in engaging with the UK’s migration system, for example difficulties in obtaining a visa, EEF would like to hear from you to feed into this work.

For more information contact Verity O’Keefe, Senior Employment and Skills Policy Adviser

In Parliament

In a Westminster Hall debate of energy intensive industries the Shadow Minister for Trade, Industry and Property Kevin Brennan outlined EEF’s concerns on the government’s current policies towards EII’s.

In a General Committee debate on the Energy Intensive Industries compensation programme, the Minister of State for Small Business, Industry and Enterprise Anna Soubry MP mentioned that EEF ‘is excellent at disseminating information to its members'.

In the media

EEF Chief Executive Terry Scuoler outlined what manufacturers wanted to hear from the budget in The Telegraph, while EEF’s comments voicing concerns about the rising cost of doing business were featured in the FT (subscription required). As National Apprenticeship week began, EEF’s comments regarding the apprenticeship levy were featured in Sky News and an EEF survey into manufacturer’s apprenticeship recruitment plans was mentioned in The Mail on Sunday. There was further coverage of EEF’s Manufacturing Outlook 2016q1 in the FT (subscription required), The Guardian and The Times (registration required).

For more information contact Alex Block, External Affairs Executive

Week in review

Trade
(January)

Total export fell in the three months to January compared with the previous three months. Declines were evident in both goods and services. While there was some improvement in the trade balance with non-EU countries, this was offset by a widening of the deficit with the rest of the EU, which hit a record level in January.

Labour market
(January)

The unemployment rate held steady at 5.1%, but there was a small decrease in the number of unemployed people in the three months to January. The fall represented a slowdown in the pace of decline from 2015. Earnings growth across the economy edged up to 2.1%; in manufacturing total pay was up 1.6%.

The week ahead

22th March: Inflation
23rd March: EEF Pay Bulletin

Blogs from this week

14 Mar 2016
Here’s a Monday morning look ahead at the data and events relating to UK manufacturing by George Nikolaidis

14 Mar 2016
We're celebrating National Apprenticeship Week with stats from our latest skills survey #NAW2016 by Verity O’Keefe

14 Mar 2016
The inclusion of plant and machinery in business rates is holding back manufacturing investment by Chris Richards

15 Mar 2016
Business investment looks vulnerable to a downgrade by Zach Witton

16 Mar 2016
Energy and climate change policy asks from EEF and manufacturers at Budget 2016 by Richard Warren

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