The UK Government’s Autumn Statement

Given the importance of the Chancellor’s Autumn Statement, here is a summary including key hospitality industry takeouts.

The full report can be found here

In summary:

General 

• Office for Budget Responsibility (OBR) says inflation to be 7.4% next year                 and will start to fall sharply by the middle of 2023

• OBR predicts economy still forecast to grow by 4.2% this year but will fall next year

• OBR states GDP will fall by 1.4% in 2023 and will rise by 1.3% in 2024 and by 2.6% in 2025

• The OBR expects inflation to peak at 11.1% in Q4 2022, compared with the peak of 8.7% in its March forecast. The OBR expects inflation to then fall over 2023 to 3.8% in Q4 2023 and to fall below the 2% target by Q2 2024. Inflation then turns negative between Q3 2024 and Q2 2026 as energy and food prices fall

Business tax

• Freezing employers’ national insurance contributions (NICs) threshold until April 2028, the employment allowance will be retained at its newer higher level of £5k, meaning 40% of all businesses will pay no (NICs) at all

• VAT threshold is already more than twice as high as the EU and OECD averages and will be maintained until March 2026

• The planned increase in the Corporation Tax rate to 25% for companies with over £250,000 in profits will go ahead. The rise in April 2023 will only affect the most profitable companies because of the Small Profits Rate

Personal tax

• Reducing threshold of when 45p rate becomes payable from £150k to £125,140

• Income Tax and National Insurance: maintain thresholds at 2023-24
  levels until April 2028

• Inheritance Tax: maintain thresholds at current level until April 2028

• Income Tax: reduce the dividend allowance from £2,000 to £1,000 from April 2023 and then £500 from April 2024

• Capital Gains Tax: reduce the annual exempt amount from £12,300 to £6,000 from April 2023 then £3,000 from April 2024

Business rates

• Bills need to reflect market values and will proceed with a revaluation of business properties from April 2023

• There will be a £14bn tax cut over the next five years

• Nearly two-thirds of properties won’t pay a penny more next year and thousands of pubs, restaurants and small high-street shops will benefit which includes a new three-year government-funded transitional relief scheme called for by the CBI, British Retail Consortium, FSB and others benefiting around 700k businesses

• Business rates: freezing the multiplier in 2023-24 – The business rates multipliers will be frozen in 2023-24 at 49.9 pence and 51.2 pence, preventing them from increasing to 52.9 pence and 54.2 pence. This is a tax cut worth £9.3 billion over the next five years. This will support all ratepayers, large and small and mean bills are 6% lower than without the freeze, before any reliefs are applied

• Business Rates: 75% relief for Retail, Hospitality and Leisure sectors in 2023-24, up to £110,000 cash cap. Around 230,000 RHL properties will be eligible to receive this increased support worth £2.1 billion

• Business Rates – Supporting Small Business Scheme (SSBS) – Bill increases for the smallest businesses losing eligibility or seeing reductions in SBRR or Rural Rate Relief (RRR) will be capped at £600 per year from 1 April 2023. This is support worth over £500 million over the next 3 years and will protect over 80,000 small businesses who are losing some or all eligibility for relief. This means no small business losing eligibility for SBRR or RRR will see a bill increase of more than £50 per month in 2023-24

• Improvement relief delayed by one year to April 2024

Employment/wages

• Unemployment to rise to 4.9% in 2024 and to 4.7% in 2025. It then falls back to 4.1% by Q3 2027

• National living wage – increasing by 9.7% so from April 2023, the hourly rate will be £10.42 (equating to an annual pay rise of £1,600+) for a full-time worker aged 23 and over. Other NMW rates to apply from April 2023, include:

  • Increasing the rate for 21–22-year-olds by 10.9% to £10.18 an hour

  • Increasing the rate for 18–20-year-olds by 9.7% to £7.49 an hour

  • Increasing the rate for 16–17-year-olds by 9.7% to £5.28 an hour

  • Increasing the apprentice rate by 9.7% to £5.28 an hour; and

  • Increasing the accommodation offset rate by 4.6% to £9.10 an hour

• Concern over sharp increase in economically inactive working age adults of around 630k people since the start of the pandemic. Employment yet to return to pre-pandemic levels. Urgent review has been called for on what is holding back workforce participation and will conclude early in the new year

• To help people already in work to increase their income and gain financial independence, 600k more people on universal credit to meet will be required to meet with a work coach to get support on increasing hours/earnings

• Despite around 50% of adults being educated at tertiary level, the UK underperforms on basic and technical skills compared to similar developed countries

• Government taking steps to ensure the education system provides the skills current and future employers need, for example through T-Levels, Higher Technical Qualifications, Skills Bootcamps and Apprenticeships

• Lifelong Loan Entitlement is being introduced from 2025 to provide more flexible finance for adults to study througho
  ut their lives

• State pension age review to be published early 2023

Energy

• By 2023 the plan is to reduce energy consumption from buildings and industry by 15% in today’s prices this will be a £28bn saving from national energy bill or £450 off the avg household bill

• £6.6bn to be invested into energy efficiency

• From 2025 new funding of a further £6.6bn

• National ambition will help reduce pressure for businesses and consumers so a new energy taskforce will launch shortly to help

• This winter – £55bn to be spent on helping households and businesses with energy bills

• Apr 2023– Energy Price Guarantee to continue for a further 12 months at a higher level of £3k per year for the avg household. Prices forecast to remain elevated for the next year, meaning an avg £500 support for every household in the country

• For the most vulnerable – additional cost of living payments next year of £900 to households on means tested benefits, £300 to pensioner households, and £150 for people on disability benefits. A new targeted approach to help businesses will launch in April

• Review of the Energy Bill Relief Scheme (EBRS) – A HM Treasury-led review of the EBRS will determine support for non-domestic energy consumers, excluding public sector organisations, beyond 31 March 2023, with the findings to be published by 31 December 2022. While the government recognises that some businesses may continue to require support beyond March 2023, the overall scale of support the government can offer will be significantly lower and targeted at those most affected to ensure fiscal sustainability and value for money for the taxpayer

Industry View

UKHospitality Chief Executive Kate Nicholls, sets out the following in her statement.

• Pleased that the Chancellor has listened to the vast majority of UKHospitality’s proposals on business rates, covering a freeze in the multiplier, extended reliefs, and no downward transition. This means those seeing their valuations decrease will see the benefit in their bills immediately, at the same time as increases are capped.

• Encouragement that the Chancellor confirmed that energy support will continue post-April for the most vulnerable sectors, of which hospitality has already been recognised.

• Highlighted that the current system is outdated and not fit-for-purpose. Failed to hear any plan from the government for economic growth, despite the Chancellor recognising its importance – “there is nothing to give firms confidence, let alone invest. A strong need to see an urgent plan for economic growth”.

UKHOSPITALITY CEO KATE NICHOLLS RESPONDS TO AUTUMN STATEMENT – UKHospitality – full statement here.

Martin Williams, CEO of Rare Restaurants which trades as Gaucho and M Restaurants had the following views:

• The restaurant sector will welcome the confirmation that the April 2023 business rates revaluation will go ahead and potentially become more equitable for hospitality venues.

• There is nothing in the budget to address the continuous unfair burden of a 20% VAT rate in restaurants and bars in comparison to a 10% rate on the same products when sold as retail.

• In the backdrop of hyper-inflation and an energy crisis, the government’s lack of support will leave many SME’s and entrepreneurs facing collapse in January, unable to pay suppliers, wages, VAT, rent and rates due to working capital shortfalls. This situation was wholly avoidable and could have been addressed by the VAT reduction which our sector lobbied for. This frustration is compounded by the news of a VAT freeze until 2026.

• The budget has failed to recognise the chronic staff shortage in hospitality, which could be easily remedied by a relaxation of immigration rules which currently restrict employment and stifle growth.

 

Additional point

A Treasury-led review of the Energy Bill Relief Scheme will determine support for businesses beyond 31 March 2023.