Thursday, November 26, 2015

News: Autumn Statement 2015

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Rothbiz editor Tom Austen looks at the Government's latest spending review and what it means for businesses in Rotherham, the Sheffield city region and the Northern Powerhouse.

The u-turn on tax credits following a defeat in the House of Lords will probably grab the headlines for the Autumn Statement where the Chancellor George Osborne pledged a fair amount of spending based on favourable estimates from the Office of Budget Responsibility (OBR).

The improvement to Government finances and continued cuts to the welfare budget meant that Osborne could state that his Government "were the builders" and pledge that £4 trillion of spending has been allocated over the next five years.

£12bn of investment is expected for infrastructure with the Department for Transport expecting cuts to day to day budgets but a big increase to capital budgets for big projects. The £46.7 billion includes HS2, roads and local transport plus the prospect of the completion of the electrification of the Midland Mainline which links London and the Sheffield city region.

Construction will begin on HS2, the high speed North to South rail link, during the Parliament and has been given a funding envelope of £55.7 billion in 2015 prices. It should reach Birmingham in 2026 and Manchester and Leeds by 2033. No announcement was made on the potential South Yorkshire station location.

The Northern Powerhouse got its first mention within minutes. In total, the Government said that it will spend £13 billion on transport in the North over this Parliament. Support has been pledged for Transport in the North that brings together the city regions of Leeds, Liverpool, Manchester, Newcastle and Sheffield. It should become a statuary body by 2017, with a £50m budget. £150m of funding has been confirmed to support the delivery of smart and integrated ticketing across local transport and rail services in the North.

Further devolution is expected on transport and in addition, the Sheffield City Region is set to get a share of the £12 billion Local Growth Fund to be spent under the direction of LEPs.

As previously announced, city-wide mayors (like the one we could have in 2016) will be able to add a premium to business rates to pay for new infrastructure.

Following a recent showcase of Northern projects in China, the Government will provide £15m of funding to support further Northern Powerhouse trade missions including to key emerging economies. A further £7m will fund a Northern Powerhouse Investment Taskforce but UKTI's budget has been cut.

Work is also taking place to create the £400m Northern Powerhouse Investment Fund with the British Business Bank and LEPs in the North West, Yorkshire and the Humber and Tees Valley to invest in smaller businesses. It builds on the work of initiatives backed by European funds such as Finance Yorkshire.

Also for small businesses, the business rates relief has been extended for another year. For example 100% relief (doubled from the usual rate of 50%) is given for properties with a rateable value of £6,000 or less.

An update on the much-needed reform of business rates was not included in the statement but the Chancellor confirmed that councils will be able to keep money from business rates but the central government grant to local authorities continues to be reduced. Local areas will be able to cut business rates as much as they like, to win new jobs and generate wealth.

For specific sectors, it was confirmed that energy intensive industries such as steel will be exempt from the policy costs of the Renewables Obligation and Feed-in Tariffs, to ensure that they have long-term certainty and remain competitive. It may have come too late for Tata Steel.

Budgets have been maintained for Innovate UK (but it will give out loans rather than grants) and increased for Catapult Centres such as the AMRC and Nuclear AMRC. Opportunities for South Yorkshire were also highlighted through a £250m small modular reactor development and nuclear research programme, pioneered by the Nuclear AMRC. The Government also talks of £1 billion for innovation funding aerospace and automotive technologies for ten years.

On skills, further details were provided on the Apprenticeship levy where large companies will put into a £3 billion pot to fund three million apprentices. It will be set at a rate of 0.5% of an employer's paybill and will be paid through PAYE. 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 £3m.

Images: HM Treasury

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