Commenting on the Budget, BBA Chief Executive Anthony Browne said:
“The economy is improving but ahead of this Budget we called for action to cement the recovery. Help for savers, exporters and businesses looking to invest were at the top of our list. On all three the Chancellor has delivered."
On savings:
“The hard-pressed saver is the winner from these radical reforms. Today’s announcements should help people who are looking to save for a rainy day as well as for their retirement."
“We called for a simpler and more flexible ISA regime. The Chancellor has gone even further by increasing the annual allowance as well as merging shares and cash ISAs. The pension reforms will provide real help to those approaching retirement as will the cut in the 10p tax rate on savings."
“Changes announced by the Chancellor will provide succour for savers trying to plan for the future whilst providing a welcome boost for the long term health of our economy.”
On exports:
“Export growth is vital. That's why we have consistently stressed the need for competitive pricing of export finance as well as changes to the system to allow support for businesses in the supply chain. We are pleased that the Government has listened and applaud the aim to give the UK one of the most competitive export financing regimes in the world."
“It takes confidence to become an exporter – this package could be just the nudge many businesses need to compete in markets around the world."
On investment:
“Business investment is crucial to the recovery. By extending and doubling the size of the annual investment allowance the Government has given businesses the confidence and certainty they need to invest.”
Background
The Budget can be read here.
The BBA’s Budget submission suggested a number of growth-focused measures to reform business regulation, promote savings and stimulate the economy. In particular, we highlighted the following:
Promote savings
The BBA made a series of suggestions to support individual savers and help create a national culture of savings:
- Enhance the ISA regime by:
- Increasing the ISA cash allowance to the same £11,880 level as that for stocks and shares ISAs for 2014/15.
- The removal of the 20 per cent charge that HMRC imposes on interest payable on cash within stocks and shares ISAs.
- Allowing transfers between cash and stock and shares ISAs.
- Resisting plans to impose a lifetime limit on ISA investments.
- Introduce more formative proposals, such as:
- Developing a workplace ISA which includes some degree of opt-out or “nudge” to begin to help people develop a savings habit.
- Expanding the range of assets which can be put inside ISAs, including securitised bonds and private equity.
- Increasing the interest limit from children’s accounts from £100 to encourage savings for children.
The Budget announced a series of landmark changes to support savers and incorporated a number of the BBA’s recommendations, including:
New ISA
- Existing ISA products will be reformed into a New ISA (NISA), which will be a simpler product with equal limits for cash and stocks and shares. The annual investment limit for the NISA will be £15,000 a year.
- For the first time savers will be able to transfer previous years’ funds from stocks and shares ISAs into cash ISAs.
- Raising the limits for Junior ISAs and Child Trust Funds from £3,720 to £4,000. These changes will be introduced from 1 July 2014.
- ISA eligibility will be extended to peer-to-peer loans, and removing all restrictions around the maturity dates of securities held within ISAs. The Government will also explore extending the ISA regime to include debt securities offered by crowdfunding platforms.
Abolishing the 10% starting rate for savings
- From April 2015 the 10% savings rate will be reduced to 0%. The Government will also increase the band of savings income that is subject to the 0% rate to £5,000.
Pensioner savings bonds and Voluntary National Insurance contributions
- National Savings and Investments (NS&I) will launch a choice of fixed-rate, market-leading savings bonds for people aged 65 or over, available from January 2015 and allowing inflows of up to £10 billion.
- NS&I will launch a 1-year bond paying 2.8% gross/ annual equivalent rate (AER) and a 3-year bond paying 4.0% gross/AER, with an investment limit of £10,000 per bond. Precise details will be confirmed at Autumn Statement 2014, to take account of prevailing market conditions at that time.
- A new scheme of Voluntary National Insurance contributions (VNICs) to allow pensioners to top up their Additional State Pension.
Premium bonds
- The cap on investments in Premium Bonds will be lifted for the first time since 2003, from £30,000 to £40,000, from 1 June 2014. It will then be lifted again to £50,000 in 2015-16.
Defined pension contributions
- From April 2015, the government will legislate to change the tax rules to allow people to access their defined contribution pension savings as they wish from the point of retirement.
- Drawdown of pension income will be taxed at marginal income tax rates rather than the current rate of 55% for full withdrawals.
Support exports
The BBA made a series of suggestions to support businesses in order to help the Government achieve its target of exporting £1 trillion by 2020:
- Focus resources on export promotion and build up regional specialists to provide day-to-day support.
- UK Export Finance (UKEF) supports 0.8% of UK exports by value and has a target of expanding that coverage to 3% in the medium term. To boost UKEF’s performance, the BBA recommended:
- Developing a supply chain finance scheme for importing materials which will be subsequently used in exports
- Government approaching the EU for a small company exemption to allow UKEF to support smaller exporters with short-term risks for all destinations
- Benchmarking UKEF against other Export Credit Agencies – particularly on price.
- Business schools should act as welcome centres to “export zones”.
- SMEs should be given free access to UKTI databases with further help for first-time exporters.
The Budget recognised our suggestions for how to make our export regime more competitive and comparable to overseas counterparts. In particular, the Chancellor announced:
- A review of UKEF legislation to support supply chains
- A commitment to lend to businesses at the lowest rates allowed by international governments
- The launch of the export refinance facility in April 2014 with the most internationally competitive rates.
The full list of measures includes:
- Doubling the size of UKEF’s direct lending scheme to £3 billion, remove the scheme end date, relax conditions on loan sizes, and lend at the minimum interest rates allowed by international agreements
- Working in partnership with the banks to deliver the enhanced lending scheme, ensuring that smaller companies can benefit from the scheme as well as mid-sized and large businesses
- Consulting on changes to the legislation governing UKEF to allow the organisation to support individual export supply chains and intangible exports
- Undertaking a marketing and communications campaign to raise awareness of UKEF’s products and services and wider export finance
- Starting the operation of UKEF’s Export Refinancing Facility by the end of April 2014
- The Chancellor also announced an increase in the resources available to promote financial services trade and investment by £2.8 million in 2014-15 and £2.8 million in 2015-16.
Encourage access to finance for SMEs
The BBA made a series of suggestions to support business investment and access to finance for SMEs:
- Develop alternative sources of finance:
- Encourage SMEs to recognise the benefits of using “the right finance at the right time”, including equity and invoice financing
- Continue to build on existing referral partnerships between banks and alternative finance providers (such as the Community Development Finance Association and Start Up Loans)
- Increase the threshold for the Seed Enterprise Investment Scheme from £150,000 to provide businesses with sufficient start-up funding
- Extend the capital gains tax exemption under the Seed / Enterprise Investment Scheme.
- Bolster the role of the British Business Bank (BBB):
- All Government business finance schemes should be consolidated into the BBB
- Local Enterprise Partnership (LEP) should also be connected to the BBB.
- Promote long-term investment:
- Extend the Annual Investment Allowance another year to January 2016
- Undertake a fundamental review of business rates, as proposed by various business groups.
The Budget set out a number of measures to make business banking easier, faster and better for businesses, including:
- A new agreement from current account providers to give their customers standardised data which will enable millions of people to work out which current account will suit them best
- Building on the Autumn Statement 2013 announcement to open up SME credit data to challenger banks and other finance providers, a new consultation on legislating to help match SMEs who are turned down for a loan with alternative lenders in order to broaden the sources of finance available to small businesses
- Support more bank lending to SMEs and encourage a more diverse banking sector, the British Business Bank will issue a request for proposals to implement an innovative wholesale guarantees programme alongside the Budget.
- An increase in the Annual Investment Allowance to £500,000 for all qualifying investment in plant and machinery made on or after 1 April 2014 until 31 December 2015.
- Make the Seed Enterprise Investment Scheme (SEIS) permanent. The Government will also make the associated capital gains tax reinvestment relief a permanent feature of SEIS, providing relief on half the qualifying gains that individuals reinvest in SEIS qualifying companies in 2014-15 or subsequent years.