Rishi Sunak’s plans to review the Apprenticeship Levy will be widely welcomed by the manufacturers, industry commentators said following the Chancellor’s Spring Statement on Wednesday. But his lack of action on escalating energy costs received criticism, while a promise to look at cutting tax on capital investment does little to support the industry now.
“Government cannot escape the fact that manufacturers are facing eye watering cost increases that are pushing many towards a tipping point and companies would have been looking for substantial business support measures to help alleviate these,” commented Make UK’s chief executive Stephen Phipson. “In particular, the lack of action on energy costs for business is especially hard to fathom.”
The Chancellor instead set out plans to “create a new culture of enterprise”, which included pledges to reform the system of R&D tax credits and cut tax rates on business investment in the Autumn Budget.
“Once the Super Deduction ends next year, our overall tax treatment for capital investment will be far less generous than other advanced economies. We’re going to fix that,” Mr Sunak told the House of Commons.
But Make UK senior economist James Brougham said: “For what was a well received policy at the time of its inception, the Chancellor has missed the significant opportunity of plucking some low hanging fruit by way of adjusting some simple, yet fundamental, flaws in the Super Deduction scheme. Alluding to forthcoming investment tax announcements in the next Budget does little to support the industry now, when investment confidence is in dire need of bolstering.
He added that the lack of immediate “investment spurring” policy announcements “will send a worrying signal throughout industry that businesses are to bear the risk alone through this fragile recovery, certainly hampering investment in the rest of the year as the tidal wave of rising costs washes away hopes of a prosperous recovery”.
The Chancellor also promised to “consider whether the current tax system, including the operation of the Apprenticeship Levy, is doing enough to incentivise businesses to invest in the right kinds of training”.
The decision to review the levy is “well overdue” and will be widely welcomed by manufacturers according to Make UK’s head of policy and campaigns Bhavina Bharkhada. “Over the last decade, the government has committed to an apprenticeship system that is led by employers and it is important that it continues to uphold this principle,” she said.
She added: “In the short term, allowing employers to use some of their levy funds to contribute to apprentice wages would immediately unlock greater investment in apprenticeships.”
Manufacturing Technology Centre chief executive Dr Clive Hickman said he welcomed the Spring Statement, “which outlines concrete steps to ensure that the manufacturing sector remains competitive, sustainable, and resilient”.
He said: “The Government’s commitment to cut tax rates on business investment is important if the UK is to boost manufacturing productivity and create high quality jobs. In addition, the reform to R&D tax credits is a very positive step that will enable the scheme to be more effective, better value for money, and more generous. These measures will be crucial to spur innovation and encourage investment across the country.”
CBI director general Tony Danker said the Chancellor’s announcements do not do enough to tackle the current challenges facing firms, but welcomed the plans to incentivise business investment from next year as “very good news”.
“We stand ready to work with the Chancellor on measures essential to transforming productivity such as capital allowances, R&D reforms and a revised apprenticeship levy. These measures lie at the heart of UK competitiveness,” he said.