Reflections on the Spring Statement

15th March 2018

Article written by:

Chris from iContract

Where in recent years we were treated to the traditional spring budget in March – 2017’s budget was the last of its kind with the budget now only taking place in autumn.

In the spring budget’s place, we now have the spring statement. A statement that updates people on the general health of the UK economy and its general progress since the last budget announcement and looks to give people an indication of what the future looks like economically so they can best prepare for it.

The final spring budget last year was a memorable one for contractors what with the government’s announcement and eventual u-turn over N.I insurance increases for the self-employed population. With IR35 reforms for the self-employed public sector also dominating the headlines this time last year, many were expecting some indication in this year’s spring statement about the government’s IR35 intentions when previously in Phillip Hammond’s 2017 autumn statement, the issue of IR35 came up only briefly with the mention of an IR35 consultation period to take place in spring 2018.

So just what happened this week with the spring statement? Well firstly, contractors expecting news on the IR35 situation did not have any news good or bad to welcome. With no mention of IR35 in the statement, the old phrase “no news is good news” was banded around but was this level of optimism shared across the country? Frankly, no. Where many pockets of the freelance and self-employed community have come to face the impending reality of potential IR35 reforms, what many freelancers and contractors were after was some form of clarity which unfortunately they did not get from the statement. With the government still evaluating the impact of public sector reform, it has left the freelance private sector in a state of limbo with professional contractor bodies and lobbying organisations stressing the need for answers sooner rather than later so the self-employed working population can best prepare for what is to come.

It is still generally accepted for IR35 reforms to spill into the private sector by April 2019 but given the government’s track record for going against the communal IR35 predictions held in large by the self-employed, added to the already delayed IR35 impact findings from the public sector – could the expected reform be delayed a further year to 2020? Perhaps with March 2019, the designated time of Britain’s departure from the European Union, implementing a radical IR35 change might be an action worth worrying about later on once the government understands more clearly what kind of post-Brexit Britain they’ll be in. Where there was more uplifting news to come from the general financial progress the UK had been making, the rise of the freelance and gig economy is believed to have influenced this positive piece of news – so could this “no news” be the government keeping the self-employed on their side for now?

Although contractors didn’t quite get the news or clarity they were hoping for from the statement, there was positive news on the UK economy, particularly on the job market with unemployment at a 40 year low with half a million people to be expected in work by 2022, as well as the Office for Budget Responsibility also reporting inflation to fall over the next 12 months.

The spring statement certainly did champion the future of the UK job market. The tech industry and the future of its work force could feel a sense of ambition and excitement for what lies ahead from the statement, with it allocating its first wave of funding from the £190 million challenge fund outlined in the autumn budget. With £95 million pledged for 13 areas across the UK, the statement ensured a prosperous digital future with the first steps laid for a fully digitally connected UK.

The importance of skills and training, and preparing the future workforce was outlined in the statement with an extension of the current tax relief to support self-employed people and employees funding their own training.

Chancellor Philip Hammond also proclaimed his Conservative party, “the champion of the entrepreneur”. This was reinforced with the statement including the mention of a possible change to which businesses pay added value tax, plus an improved and much needed change to the assessment of business rates, with rates set to be reviewed more frequently from 2021.

Expansion and growth was something the Chancellor wanted his statement to inspire, and the launching of a VAT consultation was announced to see if the current threshold for small UK businesses was stopping them from expanding. Although this might have sounded encouraging, self-employed lobbying organisations such as IPSE feared that if the threshold were to be lowered, this could put self-employed professionals such as hairdressers, carpenters and plumbers at risk, as this move would force them into raising prices to absorb costs and ultimately lose business for them.

All in all, a mood of positivity surrounded the statement, however, for contractors the IR35 saga still continues…