Lords echo small companies in condemning Jeremy Hunt’s Autumn Statement 2022 as ‘deeply, deeply depressing’

Two peers who each led IR35 inquiries have issued reactions to Autumn Statement 2022 which echo contractors’ disquiet at the chancellor’s measures.

Baroness Noakes, who chaired the Personal Service Companies Committee, said she was “appalled” at Jeremy Hunt’s statement raising the tax burden to a post-war high of 37.5%.

She said Hunt “lost sight” of growth; wrongly made “attacks on capital gains and investment income,” and offered “platitudes” in a speech that “could have come from…Gordon Brown.”

'Stability of the graveyard'

Lord Bridges, who chaired Off-Payroll Working follow-up, said Hunt’s ‘stability’ focus risks “becoming the stability of the graveyard, where ever-higher taxes…snuff out enterprise”.

The Tory peer said that more than just disagree, he ‘outright rejects’ the chancellor’s “higher taxation, higher spending and a bigger state” cocktail as “the solution to the challenges”.

Known to contractors for their no-nonsense comments on IR35 and against HMRC, Baroness Noakes and Lord Bridges were speaking at a House of Lords debate on Autumn Statement.

'Hunt is taking from smaller companies'

And while neither peer cited off-payroll despite the rules being reinstated by Hunt after their revoking at Mini-Budget 2022, the mood music for small companies isn’t lost on Lord Fox.  

“In taking from smaller companies, the chancellor seems to be giving back to the country’s bigger businesses”, the peer said.

“[This giving back is being done] via changes in the R&D expenditure credit—RDEC—scheme. But it is in SMEs that key innovations often start, and to hit them is not sensible.”

'Doesn't look like a government prioritising entrepreneurship'

Hunt’s hit on small companies hasn’t been staggered either, making it more of a thumping, according to Chris James, head of limited company accounting at Workwell.

“One important point [being lost is on corporation tax as] the last time government had a similar policy, the profit level at which the smaller business started to pay more was £300k.

“Now, several years later, this government has decided £50k is the right threshold,” he said. “That action doesn't look like a government prioritising entrepreneurship and growth.

“[It also isn’t] in line with the chancellor's aim for a ‘new Silicon Valley’ in the UK. Higher taxes can be ok, but this measure is designed to hit smaller businesses [harder] than before.”

'Every high-growth tech company experiencing labour shortages'

In the peers’ debate, Lord Bilimoria acknowledged corporation tax will be “going up from 19% to 25%,” and that “high taxes will stifle the recovery and growth.”

But the founder of beer brand Cobra suggested that the ‘stick’ from the chancellor hurts all the more, because he offered little ‘carrot’ on November 17th, and no help.

Lord Bilimoria recalled of a recent meeting: “I was addressing the highest [growth] tech companies in the country. I asked, ‘How many of you are experiencing labour shortages?’ Every single hand went up.”

'Sunak and Hunt don't seem to be small business fans'

A provider for employers of software, HRUX, outlined that same feeling of not getting the necessary from Mr Hunt, nor his boss prime minister Rishi Sunak.

“Most large and successful businesses started out as small businesses…[but ] Messrs Sunak and Hunt frankly don’t seem to be fans,” reflected HRUX co-founder Harvey Perkins.

“IR35 [reform reinstating], dividend rates [increasing and] a marginal corporation tax rate from next year of 26.5%”.

Perkins continued online: “So what on earth did Hunt mean when he said….he wants to ‘turn Britain into the next Silicon Valley?’ What does he think the mechanism is, for innovation to turn into successful businesses?”

'Chancellor Hunt listened'

To listen to Lord Leigh however, the impression is of a chancellor who responded to enterprise.

Co-founder of Cavendish Corporate Finance, the Tory peer told the Lords Autumn Statement debate:

“[Hunt] listened to real concerns from British entrepreneurs and investors in both public and private companies, who said that an increase in capital gains tax would have been a disaster for SMEs”.

'Many contractors will be looking to close'

Yet accountant Alan Broome believes that for many limited company contractors, Hunt has effectively decided for them that to keep on as they are would be the disaster.

“Now that we know that there’s no stay of execution for IR35, I fully expect many contractors will be looking to close down their companies”.

Boss at Acumenica, Mr Broome continued in a post: “Given the changes to the CGT allowance and the increases to tax from next April, it would seem 2022/23 would be the best year for starting this process.”

'Capital gains tax and dividend allowances reduced'

A former minister from both Conservative and Labour governments, Lord Howarth believes making dividends and CGT less “generous” – as Hunt said – is the least the chancellor could do.

Lord Howarth told his fellow peers: “If there is a black hole in the British economic cosmos, it is that which sucks resources away from low-income families and public services and piles them up in the bank accounts of the wealthy. The chancellor’s reductions in capital gains tax and dividend allowances twinkle only faintly in that murk.”

For the Liberal Democrats, Lord Fox tried to find something all the peers agreed on.

'Very worrying'

“While we are all agreed that growth is the key to digging the nation out of this hole, the chancellor is introducing measures that will reduce growth.

“This is not only practically damaging but a very clear indication that this government do not understand innovation," the Lib Dem peer told the debate. "And that is very worrying.”

It’s also anti-entrepreneurial according to Forgotten Ltd.

'Heaven help anyone who actually succeeds'

In an update for its followers last week, the limited company support group spoke of a “seemingly never-ending flow of measures [from the government], aimed at squeezing the life [out] of the seed-corn of potential bigger businesses -- the ambitious and entrepreneurial.”

“Heaven help anyone who actually succeeds,” warned HRUX’s Perkins, co-founder of the six-year-old start-up which before Autumn Statement was on the verge of employing its third member of staff.

“After years of ploughing money into your business…[like we’ve done, you realise] the one thing this government seems to hate more than a small business is a successful small business.”

'Deeply, deeply depressing'

At the peers’ debate of Autumn Statement 2022, Baroness Noakes said: “I have not always been inspired by the various Budget statements, Autumn Statements and Spring Statements since we came into government, although I have generally been able to content myself that they were undoubtedly better than anything that a Labour government would have come up with.

“With this Autumn Statement, even that flimsy source of comfort has disappeared: it could have come from the pen of Gordon Brown. It is deeply, deeply depressing, and it is not a Conservative Budget.”