Today’s Budget Statement fell at an unwelcome time for the Chancellor. Between global economic headwinds and turmoil closer to home within the Conservative party as the UK heads towards the poll boxes on Europe in June, the pressure was on for the Chancellor to deliver a solid performance.
As expected, the overall tone of the Budget continued that set at last July’s Budget and reinforced again in November at the Autumn Statement to evolve the UK to a higher wage, lower tax and lower welfare economy.
This was a Budget with few giveaways, unsurprising given that the Chancellor today revised down the UK’s growth forecast over the course of the next Parliament. As a consequence of this he also announced that a further £3.5 billion of savings from public spending in 2019/20 would have to be found, though there was no detail today on how that would be achieved.
Read on for the key announcements of relevance to the UK’s bioscience sector.
You can access the full documentation associated with Budget 2016 here.
Tax, business and enterprise
The Chancellor was keen to emphasise the government’s commitment to the “enterprise and innovation by British businesses which will deliver growth and opportunity for the next generation”.
Publishing the business tax roadmap alongside the Budget, key announcements include:
- Further to previous announcements that corporation tax would be cut to 19% in 2017 and then to 18% by 2020, today the government announced that corporation tax would be reduced to 17% in 2020.
- The higher rate of Capital Gains Tax (CGT) for most assets will be cut from 28% to 20%. The basic rate of CGT will be cut from 18% to 10%. There will be an 8% surcharge for gains on residential property and carried interest for fund managers. The government hope that this will mean that CGT provides an incentive to invest in companies instead of other investments such as buy-to-let property.
- Entrepreneurs’ relief will be extended to longer term external investors in unlisted companies. This will provide a 10% rate for external investors holding shares in unlisted companies for at least three years. It will apply to newly issued shares purchased on or after 17 March 2016, provided they are held for a minimum of three years from 6 April 2016, and will be subject to a separate £10 million lifetime limit on eligible gains. The government hopes that this will provide a further incentive for longer term investment into unlisted companies, helping them to access the finance they need to grow and create jobs. The BIA called for the government to look again at how Entrepreneurs Relief could be improved. This is a welcome announcement and it will be interesting to see what behaviour it drives in practice and how “external investors” are defined in legislation.
- The government confirmed that it will introduce legislation to reform the Patent Box in Finance Bill 2016, so that this is consistent with the nexus approach agreed at international discussions, which links benefits to the level of R&D investment undertaken. These new rules will need to take effect by 1 July 2016 and the Finance Bill will be published on 24 March 2016.
- There are also changes on loss relief. For losses incurred on or after 1 April 2017, companies will be able to use carried forward losses against profits from other income streams or from other companies within a group.
- The government have committed to improving business interaction with HMRC. Today the government stated that it will introduce a dedicated phone line for businesses and self-employed individuals, announce plans by the end of 2016 to provide mid-sized businesses with access to a named adviser and pilot the delivery of targeted support to high-growth businesses through joint-working between HMRC and Regional Growth Hubs.
Science, health and innovation
There was not much mention of science or health today, however that is not surprisingly given the focus of the Comprehensive Spending Review and the details that continue to emerge from those announcements. It was disappointing to see a lack of mention of innovation today though we understand that focus will follow through the Department for Business, Innovation and Skills (BIS)’s National Innovation Plan. Further details are expected shortly and the BIA continue to engage with BIS on this issue. Watch this space.
There were however some announcements across the UK to note including:
- Quadrum Institute: a £50 million contribution to a new world-leading centre for food and health research at the Norwich Research Park.
- Compound Semiconductor Catapult: an investment of up to £50 million up to 2020/21 to establish a new Compound Semiconductor Applications Catapult in Wales.
- The use of LIBOR funds to support children’s hospital charities in Manchester, Southampton, Sheffield and Birmingham.
Unsurprisingly the issue of devolution was central to many of the Chancellor’s announcements today, including news on developments in the East of England.
The Chancellor gave mention to a new “single powerful East Anglia combined authority” in his speech and the detailed Budget documentation confirmed a mayoral devolution deal with East Anglia, covering Norfolk, Suffolk, Cambridgeshire and Peterborough, giving the local area new powers over transport, planning, skills, a £900 million investment fund over 30 years to grow the local economy, and access to £175 million ringfenced funding to deliver new homes. However, as the agreement documentation sets out, not all Councils and Local Enterprise Partnerships across these regions have to date signed up to the deal.
The Chancellor also mentioned the new £1 billion pound city deal for the Cardiff region, a new West of England mayoral authority, a new deal for Greater Lincolnshire and further infrastructure investments in the Northern Powerhouse.
Skills and Apprenticeships
The previously announced Apprenticeships Levy was again referenced today, confirming that further details on the operating model will be published in April and draft funding rates will be published in June.
Also announced today:
- For the first time, direct government support will be available to adults wishing to study at any qualification level, from basic skills right the way up to PhD. During this Parliament, loans will be introduced for level 3 to level 6 training in further education, part-time second degrees in STEM, and postgraduate taught master’s courses.
- From 2018-19, loans of up to £25,000 will be available to any English student without a Research Council living allowance who can win a place for doctoral study at a UK university. They will be added to any outstanding master’s loan and repaid on the same terms, but with the intention of setting a repayment rate of 9% for doctoral loans and a combined 9% repayment rate if people take out a doctoral and master’s loan. The government will launch a technical consultation on the detail in due course. Those who take out only a master’s loan will still repay at 6%, as announced at Autumn Statement 2015. The government will also extend the eligibility of master’s loans to include three-year part-time courses with no full-time equivalent.
Finally the Chancellor took the opportunity of his Budget Statement to quote the Office of Budget Responsibility on the potential impact of the UK leaving the EU, referencing their comments that “a vote to leave in the forthcoming referendum could usher in an extended period of uncertainty regarding the precise terms of the UK’s future relationship with the EU. This could have negative implications for activity via business and consumer confidence and might result in greater volatility in financial and other asset markets”.