“Don’t be fooled, Rishi Sunak is a fiscal conservative first, and a low-tax conservative second.” So begins Sam Dumitriu’s response in City AM to the Spring Statement.
By freezing tax thresholds, the Chancellor is stealthily raising taxes by dragging many into the higher rate of tax. In 1992, 1.6m paid the 40p rate of Income Tax; in 2022, three times as many (4.8m) pay it; in 2026, the OBR forecast 6.8m will pay it. He’s also timed his tax cuts for maximum electoral advantage: “more pain now, but a nice feel good year in 2024”. This will hit the poorest hardest.
Beyond the headlines, Aria Babu has picked out some of the announcements you might have missed. It wasn’t all bad – for example, R&D Tax Credits will be expanded to cover cloud & data – but Coadec and others were disappointed to see that the government has decided not to change the EMI share options scheme. In his newsletter, Dom Hallas links to a mini-tweet thread from Matt Clifford and the #NotOptional campaign, which called on European legislators to fix the patchy, inconsistent, and often punitive rules that govern employee ownership. I expect we’ll see a similar campaign here, which we’ll keep you updated about.
A disappointing Spring Statement isn’t the end of the world. It isn’t supposed to be a big fiscal event. The budget, in six months time, is much more important. Sam has spotted signs that it could be a big one for tax reform: “Top of the list is tackling under-investment. The Chancellor has rightly identified that by international standards our tax system’s treatment of investment in physical capital is stingy. He will need to act soon to fix that as next year the super-deduction will expire and corporation tax will rise to 25 per cent.”
The solution here is full expensing, which Sam argues for in Energising Enterprise, a new report he’s penned for Bright Blue (I don’t know where he finds the time!).
You can see the UK’s current lacklustre economic trajectory in this Resolution Foundation chart: real wages in the UK will rise by about as much in 19 years as they did in a normal 19-month period before the financial crisis. This isn’t good enough.
As Duncan Weldon writes: “UK macro-policymakers just keep accepting economic damage as irreversible. They shouldn't." We need is growth. The policy ideas are ready and waiting. There really is no alternative.
Double Standards
Aria has written on our blog about the unfair way female founders are treated by the media: “Female entrepreneurs are accused of getting into cat-fights, of not being feminist enough, being hyper-critical, cruel, mercurial, inexperienced, and of “going too far” when pivoting their business.”
On the theme for female founders, get involved in our Female Founders Forum. On Thursday we have a lunchtime roundtable in Southampton with Rt Hon Caroline Nokes MP, who chairs the Women and Equalities Committee, if you can make it.
Something Ventured
Also on Thursday, we’re hosting a Something Ventured virtual roundtable with Ian McLennan, Partner at Triple Point. This series of events are arguably the most information rich we do. In 40 minutes you (and I) will learn and discuss emerging digital and data insights, back office innovations, and valuations. We keep these events purposely small, so please let me know if you would like a place.
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