In his third Budget as chancellor, Hammond laid out measures that leaned heavily on health services – including an extra £20.5bn for the NHS in the next five years and a minimum extra £2bn for mental health – while his business and economic policy centred around offsetting the potential impact of Brexit next year.
He announced that, as of January, the annual investment allowance (AIA) will be raised from £200,000 to £1m for the next two years, increasing the amount of capital expenditure businesses can deduct from taxable profits to spend on equipment.
This is likely to be met favourably in print, where investment costs regularly exceed the threshold of the AIA – incentivising boosts in productivity and enterprise ahead of Brexit.
BPIF chief executive Charles Jarrold said: “It’s welcome that productivity is still a priority for the government. When it comes to firm-level factors that affect it, trade bodies are perfectly placed to help their members improve.
“But government must also play its part to support productivity across the board. We have asked for measures to help companies invest in equipment, skills and improvements in their processes. The increase in the AIA is welcome. Investment in the UK lags behind other leading economies, so this is a step in the right direction.
“For an industry in which costs are often well over £200,000 for a single piece of equipment, this is a welcome move which should provide a quick helping hand to investment.”
Hammond told Parliament – in a speech in which he declared austerity “is coming to an end” – that he would be funnelling a further £500m into a growing pot of funds for Brexit preparations now exceeding £4bn, while small businesses are set for a £900m rates relief.
It was announced that, as of April 2020, HMRC will be made a preferential creditor in business insolvencies “to ensure that tax which has been collected on behalf of HMRC is actually paid to HMRC”.
Hammond suggested that, given the unpredictability of the Brexit process following the March 2019 deadline, his Spring Statement in April may be upgraded to a full Budget.
Contributions to the apprenticeship levy by small businesses are set to be reduced from 10% to 5%, while a 2% “digital services tax” is to be imposed from April 2020 on large technology companies such as Facebook and Google predicted to raise £400m per year.
Newly appointed managing director at Launceston-based KCS Print Zoe Deadman said: “Changes to the AIA will have a positive impact across the print sector where spending has slowed down. Whether it is enough or not at this time, it is a step in the right direction and I hope to see the government do more in terms of productivity in the future.
“Any additions to the Brexit fund are too little too late. Companies are already pressing go on contingency plans – we are talking to suppliers about increasing stock and finding more space. If there is another Budget in the spring, government plans will be torn up anyway.
“In terms of the digital tax, it’s a drop in the ocean for these firms and just a red herring that sounds good and has very little effect. I think the main digital policy that will impact print is still GDPR – which is a great opportunity for us at the moment.”
With environmental issues still high on the policy agenda, Hammond also used his speech to announce a new tax on plastic packaging that is not made of at least 30% recyclable material, but an anticipated tax on takeaway coffee cups – a “latte levy” – will not be implemented as the Chancellor elected to see what progress the industry could make itself before taking action.
James Cropper chief executive Phil Wild said: “Significant strides have been made in the supply chain already. This can only improve as more plastic-free packaging solutions are made available and the infrastructure for waste materials works to keep recyclable materials in the value chain.
“We hope that the decision from the Chancellor will put fire in the bellies of UK businesses to accelerate plans to seek plastic-free packaging alternatives.”
For Packaging Collective founding partner Sanjay Patel, who is campaigning for closer collaboration between sectors to improve sustainability in the packaging industry, the tax appeared to be a “knee-jerk reaction” that needed more clarity.
“What we need to know is what will happen to this money once it is collected in tax,” he said. “There are fundamental issues in our recycling infrastructure which are confusing for people.
“If this tax pays for investment in local authorities and infrastructure, then that would be great, but we need consumers to know more about how to recycle so we can actually recover these materials going forward.”
