With Boris gone how will the new administration affect business?

It’s 12th July, and the feverish bunker mentality that has taken over Westminster over the preceding weeks has finally come to a close. The Johnson administration is well and truly over, and our thoughts turn to the new administration. The Johnson premiership was characterised by a surprising lack of adherence to traditional Conservative economic ideology. I never thought I’d see a Conservative Government that would effectively introduce a universal basic income to the UK through the furlough scheme and work to keep private businesses afloat with public funds. It was all overwhelmingly to the good, of course, but what will the new administration look like in terms of business policy once this caretaker government is over and a new, more permanent, Cabinet is appointed?  

A slew of tax cuts?

The Conservative Party is of course one that prides itself on low tax, and the most obvious casualty of a post-Rishi Treasury will likely be the 1.25% National Insurance rise that came into effect April, with multiple candidates coming out against this policy. Another reform that has been suggested by front-runners like Sajid Javid is the cutting of Fuel Duty by 5-10% to ameliorate the squeeze on taxpayers caused by rapid inflation and increases in the cost of living. Similarly, many have also backed slashing the standard rate of VAT to 17.5%, and scrapping the four-year freeze on Income Tax thresholds announced by Rishi Sunak earlier this year. To attract more foreign investment in the UK and increase Treasury yields, the former Health Secretary Jeremy Hunt and current Foreign Secretary Liz Truss have pledged to cut Corporation Tax.  

But what about business policy more generally?

There is undoubtedly a huge amount going on in the business policy space currently, including the ongoing review of the capital allowances system The Conservative Party’s pervasive right-wing has of course traditionally been sceptical of ‘big-government,’ and given that attitude, it may be that we will see a wholesale reform and simplification of the allowances and reliefs in the new administration. De-regulation is also on the cards, with the Department for Business, Energy and Industrial Strategy and Treasury likely to team up to reduce red tape, as promised in Conservative party manifestoes since time-immemorial. A number of the candidates are speaking about reducing the size of the civil service to fund tax cuts, and it could follow that HM Treasury is hit by these changes. As such, we should not expect major changes to the trajectory of the Treasury around digitisation. MTD for ITSA plays an important role in increasing the productivity of HMRC’s workforce and reducing headcount. Likewise, a reduction in numbers could affect the way in which bookkeepers engage and interact with HMRC, but what the organisational structure would look like pending such cuts remains to be seen.  

What does this mean for businesses?

Over recent years, the Conservative Party has seen deep ideological divisions arise in its ranks over tax and spend and regulation, and it’s fair to say that the approach to business and the economy will largely be dictated by the personalities that take up long-term residence in Numbers 10 and 11 Downing Street. The Thatcherite leadership candidates, the Sajid Javids and Nadhim Zahawis of the world, are likely to cut tax and seek to deregulate the economy, meaning lower tax bills and possibly less paperwork.  The more left-wing Conservatives, like Jeremy Hunt and Rishi Sunak are likely to be more reticent about reducing income to the public purse, and it may be that the new administration looks very similar to the current one. Whatever the future looks like, what is certain is that my role in communicating legislative and tax changes and in helping clients to navigate them is more important than ever. I will of course work hard to support you in fulfilling this purpose and will do utmost to keep you up to date with any new policy developments as I hear them.

Leave a Reply

Your email address will not be published. Required fields are marked *