Budget doesn’t go far enough in cutting red tape, say business groups

Business groups have welcomed certain announcements in the Budget, such as the 5p cut to top rate tax, but have warned that it doesn’t go far enough to reduce the regulatory burden on employers.

Chancellor George Osborne confirmed earlier today that the higher tax rate, currently 50% for income of more than £150,000, will be reduced to 45% from 2013.

As previously announced, the personal income tax allowance, the amount before which an employee pays no tax, will also increase by £635 to £8,105 from April 2012 and by £1,100 to £9,205 from April 2013.

John Cridland, director-general of the CBI, welcomed the changes to the top rate tax, but said that some employers may have been looking for more to relieve the regulatory burden.

He said: “Plans to reduce the top rate of tax to 45p by April 2013 will show our top, and aspiring, talent that this Government wants them to create wealth here. With many calls on the Chancellor to spend money he didn’t have, the best news for businesses is that he stuck to his guns and delivered a fiscally neutral programme.

“If businesses were looking for more, it was in the area of deregulation. For smaller businesses, things may not feel very different on the ground.”

Simon Walker, director general of the Institute of Directors, echoed Cridland’s comments that the Budget did not go far enough on business regulation.

“The Chancellor has not done enough to free business from the burdens and barriers that are holding economic growth back. Businesses dearly want the opportunity to invest, create and build, but George Osborne must go much further if he wants to fire up the engines of the economy.”

However, Mike Emmott, employee relations policy adviser at the CIPD, argued that getting rid of employment regulation is not the way to boost growth.

“If the Government is serious about increasing economic growth, it will look to support employers’ efforts to build an engaged workforce,” he said. “Taking away employment rights is not the answer and there is no evidence to support such a claim.

“If the Government wants high performing workplaces, so as to increase productivity and support economic growth, it needs to accept that they cannot be built on the back of unfair treatment of employees. Fairness, trust and respect are the basis for successful employment relationships, not dumbing down management practice to the level of the least competent.”

Osborne also confirmed in the Budget that the Government will:

  • Relax Sunday trading laws for the Olympics and Paralympics for eight Sundays from 22 July 2012 to 9 September.
  • Begin a detailed consultation on integrating the operation of income tax and national insurance contributions.
  • Ask the independent pay bodies to look at whether or not the Government can make public sector pay “more responsive to local rates”.
  • Conduct an internal review of the role of employee ownership in supporting growth in order to remove barriers to its take-up.
  • Scrap or improve 84% of health and safety legislation.
  • Introduce an automatic review of the state pension age, details of which will be published in the summer.
  • Reform the state pension into a single-tier pension.
  • Simplify the tax regimes for small firms and consult on plans for firms with a turnover up to £77,000 per year.
  • Improve and reform the Enterprise Management Incentive scheme for start-ups, by consulting on how to remove restrictions to its use and doubling the individual grant limit to £25,000.
  • Pilot a programme of enterprise loans to help young people set up businesses.

Find a full round-up of announcements in the Budget for employers on XpertHR.

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