Chancellor Philip Hammond announced a series of policies that could impact co-operatives in his autumn budget statement to the House of Commons yesterday (19 October).
The sector welcomed some of the changes around housing policy, credit unions and support for small retailers, but warned that it lacked a strategic dimension to address the issues facing the UK economy post Brexit.
Ed Mayo, secretary general of Co-operatives UK, said: “This is a time of extraordinary risk for the UK economy in the context of Brexit. So, while it makes sense to ease public spending, it would be hard for any chancellor to offer more than a stop-gap budget.
“A number of the specific measures will be welcome, including a degree of support for small retailers and for social housing, but this is a tactical and not a strategic budget. It does little to answer the question of what kind of economy Britain is to pursue in future. That is the debate that is now needed.”
Described by the Office for Budget Responsibility as the “the largest discretionary fiscal loosening” since at least 2010, the budget is based on better borrowing forecasts. According to the OBR, the forecast assumes a relatively smooth exit from the EU next year. The chancellor said he would retain “firepower to intervene if the economy needs more support in the coming months”, including upgrading the spring statement to a full fiscal event.
Small independent co-ops and community shops could benefit from alterations to rateable values. The chancellor announced that for the next two years up to the 2021 revaluation, all retailers in England with a rateable value of £51,000 will see their business rates bill cut by one third. “That’s an annual saving of up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafes,” he said.
Co-op pubs will also benefit from the freeze in beer and cider duty for next year.
In terms of housing, the chancellor is extending stamp duty for first time buyers to all first time buyers of shared ownership properties valued up to £500,000. He said the government would make this relief retrospective, so any first time buyer who has made such a purchase since the last budget will benefit.
The budget allocates a further £500m for the housing infrastructure fund which, said Mr Hammond, would help to unlock 650,000 homes.
The government will also create strategic partnerships with nine housing associations which will deliver 13,000 homes across England and provide funding to help up to 500 neighbourhoods to allocate or permission land for housing through the neighbourhood planning system for sale at a discount to local people.
The chancellor also confirmed the government would be removing the housing revenue account cap and provide up to £1bn of British Business Bank guarantees to support the revival of small and medium enterprises working in house building.
“We are consulting on simplification of the process for conversion of commercial property into new homes,” he added.
Nic Bliss, head of policy at the Confederation of Co-operative Housing, said: “There are some potentially interesting measures in the budget for housing – the housing infrastructure fund; the support for using empty high street properties for homes; the support for SMEs; confirmation of the scrapping of the cap on council house building.
“The CCH also supports shared ownership and removal of stamp duty will help some people.”
But, he added: “The scale of the housing crisis means that there is a need to build many more rented homes available to people at various income points. It is questionable whether particularly targeting support for owner occupation, which will only achieve affordability for the first buyer of the home, is the best use of public money.
“Achieving former 70% plus levels of owner occupation, which certainly contributed to the global financial crisis, will never be sustainable in the UK, and there is a need for a long term national housing strategy that looks for alternative ways of housing our population – including using co-operative solutions. It is welcome that the current government has provided the community housing fund to enable development of community-led housing schemes and this approach needs to be developed further.”
Meanwhile, the Association of British Credit Unions (Abcul) welcomed the announcement of a pilot prized-linked savings scheme for credit unions designed to boost peoples’ financial resilience and raise awareness of the sector.
Head of policy and communications Matt Bland said: “This initiative will be good for both credit unions and their members; it will provide people with a further incentive to save regularly with their local credit union for planned and unplanned expenses. Abcul is working closely with Treasury on the pilot scheme and we look forward to ensuring the best solutions moving forward for the credit union sector.
“It is also pleasing to see the government reinforce its dedication with the Department of Digital Culture Media & Sport’s £55m fund to capitalise and expand the affordable credit sector. The dormant assets money will help create a new financial inclusion organisation. ABCUL looks forward to working with DCMS to ensure that credit unions are involved in the scheme to maximise its impact in boosting the financial inclusion and capability of the country.”
In other measures, he unveiled a new tax on the manufacture and import of plastic packaging which contains less than 30% recycled plastic. A new UK digital services tax will target the UK-generated revenues of specific digital platform business models.
The digital services tax, which comes into effect in April 2020, will only be paid by companies which are profitable and which generate at least £500m a year in global revenues across the business lines in scope.
Paul Monaghan, chief executive of the Fair Tax Mark, which a number of co-ops have already adopted, said: “The new digital services tax may be a welcome beginning to tackling the tax avoidance displayed by big tech multinationals in the UK, and the unfair economic advantage this grants them.”
But he warned that the tax seemed to have been “narrowly defined”, “will likely not capture the tax dodging antics” and is “probably set generously low”.
Jim McMahon MP, chair of the Co-operative Party Group of MPs, criticised the budget for not supporting the growth of a more co-operative economy.
He said: “This was a budget that failed to champion the fairest forms of business: co-operatives democratically owned by their customers and employees. In other words, this was a recipe for more of the same.
“According to the IFS, it will take £19bn just to avoid further cuts, and as much as £108bn could be needed to reverse a decade of economic self-harm. Austerity may be coming to an end in the minds of the Tory Party, but it’s time for the chancellor to face up to the fact that you can’t end austerity if you tolerate companies who avoid tax.”
Mr McMahon said a Co-op Party budget would require companies to demonstrate basic standards of tax transparency through measures such as the Fair Tax Mark. The party would also aim to double the size of the co-operative sector and to actively encourage diverse forms of grassroots enterprise, by differentiating corporation tax treatment of social, private and plc businesses.
Mr McMahon added the Party would introduce “a radical redesign of business rates to end to the unfair advantage enjoyed by online retailers” and “a fair funding settlement for local government that enables local authorities to invest in the services and social infrastructure”.
He said: “It’s within our power, through the decisions we make as consumers and here in Parliament as policymakers, to shape those trends and decide the kind of economy we want, and the kind of business culture that can deliver it. At a time when the country needed boldness, this is a missed opportunity to transform how our economy is run.”
Peter Holbrook, chief executive of Social Enterprise UK, said: “Champagne corks will be popping at the prospect of £9bn in tax cuts for business which the government has planned over the next five years. But what are we getting for this? Higher dividends for shareholders and bigger bonus cheques for CEOs?
“The chancellor had an opportunity to back social enterprises which share growth by paying their staff fairly and reinvesting their profits back into their communities. Unfortunately, he decided to rely on old fashioned and failed economic ideas.
“If we want to build an economy that truly works for everyone, we need to back a different type of business. There is little in this Budget to give people confidence that we are heading towards anything other than simply more of the same.”