There are many things that the Chancellor could do while still ensuring that businesses and their employees keep to the guidelines which have been given, although these may change when the Prime Minister makes his announcement on Sunday (10 May) about how we start to move forward both from a business and personal perspective.
There are all sorts of things he could do, but it is a balancing act in terms of what could be offered to get the economy moving again and how he will raise money in the future to cover the huge bill that he has incurred with the various Government support schemes.
What could the Chancellor do?
- Extend the Job Retention furlough scheme to cover employees who return to work on reduced hours once the economy starts to reopen.
- Give temporary reduction in VAT to reduce prices for consumers and encourage spending, without impacting the cash businesses receive. The minimum rate he could reduce VAT to would be 15%.
- Offer support for childcare to working families, perhaps increasing the tax-free childcare scheme.
- Widen the Coronavirus Business Interruption Loan Scheme to ensure that working capital is not an issue for business when they reopen.
- Offer employers National Insurance holidays for new staff to encourage new employment.
- Extend tax reliefs for individuals who want to invest in start-ups and private businesses to make private investment more desirable; perhaps by widening the qualifying category of businesses or removing some of the qualifying conditions.
- Allow train companies to offer flexible Carnet type tickets to ensure workers can return to work in an affordable manner.
- Encourage banks to widen credit insurance schemes and credit limits under such schemes to allow trade to pick up back to pre-COVID-19 levels.
- Ensure Government contracts are offered to smaller businesses rather than the larger consultancy corporations – this will ensure that small business continues to be supported.
- Review import tariffs and provide support on export tariffs (perhaps by guaranteeing or paying these for the exporter).
- Offer retaining grants to encourage employers working in areas with skill shortages to retrain the large number of unemployed from the hardest hit sectors.
In the longer term, the Chancellor needs to consider how he will raise money to pay for the historic support he has given to the people of the country, and this is likely to come in the form of tax rises. For example, if he gives a VAT rate reduction now to boost the economy and stimulate spending, he could increase VAT beyond 20% in the future.
While these are inevitable, these tax rises should not be put in place immediately – the economy needs to be kick-started and some of the rumoured measures (8% rise in Income Tax rates, NIC flat rate of 12%, etc.) would serve to simply stall the engine again before it has properly got running.
In the short-term, living with a higher debt burden and waiting to raise taxes would seem to be the best way to ensure seeds of growth are able to flower. The Government support measures should be unwound in a gradual and flexible manner. This will more suitably reflect the way that some businesses/sectors and the economy as a whole will return to work and come out of recession. Having a hard-stop date is likely to lead to an increase in unemployment and therefore the cost remains with the Government and indeed other tax revenues (direct and indirect) will be lower than otherwise.
If you would like to discuss any of the above or have other queries about how you can make the right decisions for the future of your business and your income, please contact your usual Blick Rothenberg contact or Genevieve Morris.
You can also visit our Coronavirus – Practical Guidance for businesses today Hub for our latest updates and insights.