THE Chancellor’s Spending Review was full of national headlines, but is also set to make waves on a local level.
George Osbourne’s announcement, which set out the spending plan for the five years leading up to the next election, has received a mixed reaction from experts and politicians from across Taunton and Somerset.
The Chancellor said: “At the centre of our plans to help working people at every stage of their lives are further investments in schools for our children; a world-class National Health Service; new protections for police and defence budgets and the biggest rise in state pensions since 2001.”
“The South West is a key part of that plan and that’s why today I have confirmed major investments there in areas like transport, education, culture as well as driving down the costs of local water bills.
“This is a Spending Review which delivers for the people of the South West.”
Rebecca Pow, MP for Taunton Deane, was supportive of George Osborne’s plans.
She said: “In particular I welcome news that police budgets will be protected and the largest commitment to the NHS since its creation was pledged including the £6 billion to be delivered next year and an additional £600m for mental health.
“There's a real commitment to home ownership too with the doubling of the housing budget with even more emphasis on affordable homes to buy which will help many people in Taunton Deane to get into the housing ladder.
"My personal approach to the chancellor to ease the tax credit issue too was heard which I am also very pleased about."
Dale Edwards, chief executive of the Somerset Chamber of Commerce, was also supportive of some of George Osborne’s plans.
He said: “With new enterprise zones, a focus on apprenticeships, extension of the small business rate relief scheme, and an intention to spread economic power and wealth across the nation, there should be plenty of opportunity for Somerset businesses to share in this growth.”
However, Somerset County Council’s leader Cllr John Osman was outspoken about the Spending Review.
He pointed out that councils’ core funding will continue to be reduced, and the SCC will be unable to retain all the business rates in the area due to “no speeding up of crucial changes.”
The Chancellor announced that local authorities would be able to raise up to two per cent on Council Tax to help fund adult social care.
This is expected to raise around £4m in Somerset, in addition to any other Council Tax increase implemented to protect services.
Cllr Osman said: “A two per cent precept wouldn’t even cover the additional costs incurred next year as a result of our ageing population, then you have the costs of inflation and the impact of the National Living Wage.
“The new precept does nothing to address the fundamental underfunding of the local authorities providing these services, it simply allows councils to put an additional burden on Council Tax payers.”
Molly Scott Cato, South West MEP and Green Party finance spokesperson, said: “It is clear that George Osborne’s harsh austerity agenda has failed even under its own terms. While the deficit may be reducing, national debt continues to rise.”
Taunton’s financial experts have been pouring over the Autumn Statement and Spending Review.
Paul Aplin, tax partner at A.C. Mole & Sons and chairman of the technical committee at the ICAEW Tax Faculty, said claims that introducing digital tax reporting will reduce business costs by £400m by 2020 are “astonishing.”
By the next election, businesses, self-employed and landlords will have to keep track of their tax affairs digitally and update HMRC once a quarter.
“It will affect every electrician, plumber, pub and small business in the land,” Mr Aplin added.
“This shows a lack of understanding of how small businesses operate and of the burdens such changes place on them.
“HMRC is attempting to move too far, too fast and with too little understanding of the way businesses operate.”
Samantha Cooper, managing director of Cooper Associates, based in Taunton, highlighted the significant impact the review will have on landlords.
“As a result of the Autumn Statement, a new three per cent additional stamp duty on any property bought as a buy-to-let or a second home will be applied from April 1, 2016.
“From April 2019, any capital gains tax due on the disposal of residential property will have to be made as a payment on account within 30 days of the disposal.
Buy-to-lets represent more than 15 per cent of total housing purchases according to the Council of Mortgage Lenders.
“The current and expected changes will clearly have a profound impact on landlords with the increased tax having a bigger impact in higher priced areas.
“With fewer buy-to-let purchases and existing landlords potentially selling their properties, the available stock to rent will reduce and in turn drive up rent.
“Across the market in general it is likely we will now see an influx of activity as anyone already thinking of buying a second home or an investment property starts actively searching in order to avoid stamp duty changes.
“This could potentially distort property prices and buyers need to exercise caution that the stamp duty saving made is not completely eradicated by any downturn in property prices after April.”
Sheldon Cole, tax partner at Albert Goodman, said: "It may be cynical but it was a struggle to find many business “winners” in last week’s Autumn Statement.
“True, the Government’s plans to reform the planning system and deliver a million new homes by 2020 have been welcomed by the construction and related sectors and rightly so.
“But what was there to encourage other businesses? Not a great deal, and the “Apprentice Levy” – a new payroll tax in all but name – will place an additional cost and compliance burden on medium-sized and large employers.
“If you are an owner-occupier, then all is well and good, but if you own a second home or a buy-to-let, then you will pay a high price for the privilege.
“Residential landlords have recently had the very unwelcome news that higher rate tax relief for loan interest costs will be phased out by 2020 and the wear and tear allowance for furnished lets abolished next year.
“This will have an impact locally for private landlords who service the tourism sector and for those playing an important role in the context of the Hinkley C Project.
“It is questionable whether the Government’s policy of treating landlords as cash cows to be milked more and more frequently makes economic sense.”
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