Hammond's 'humiliating' NI U-turn: How the papers reacted

Chancellor comes under attack, but Theresa May will retain her reputation for 'steadfastness and resolution'

Theresa May
(Image credit: Jack Taylor/Getty Images)

Budget 2017: Hammond in 'listening mode' on business rates

21 February

Philip Hammond has told Tory backbenchers he is in "listening mode" over controversial changes to business rates coming into effect from April.

Addressing his party's influential 1922 Committee last night, the Chancellor hinted the government "is looking at alleviating the impact" of the changes, sources told The Guardian.

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One person at the closed-door meeting said: "It is a real challenge to the tax system when you have a specific tax based on property.

"It is very difficult and [Hammond] told MPs that he was alive to this but that it isn't something that can be changed overnight."

Business rates, which are paid by all businesses with physical premises, are based on the value of a company's property and are typically revalued every five years.

However, the latest reassessment, which comes into effect in April, has been delayed by an additional two years, increasing the tax bill for many companies by up to several hundred per cent.

In its defence, the government says the overall policy is revenue neutral and that three-quarters of bills will stay the same or fall. It has also set aside £3.6bn to phase in any increases over five years.

However, business groups are up in arms and are demanding next month's Budget softens the blow for 500,000 firms facing increases.

This is a particularly sharp issue for the Tories - many of the affected constituencies are in the Conservative-dominated home counties, with Hammond's own Runnymede and Weybridge facing an overall rise of 13 per cent.

"Treasury sources said Hammond told MPs he was also aware of the challenges of the growing digital economy, amid warnings that smaller shops could go under as a result of increases, while the online retail giant Amazon would enjoy a cut in the tax bill paid for its warehouses," says the Guardian.

In addition, a clause in the new rules refers to valuations being in a range of "professional judgement", which some fear could be used to prevent appeals.

Senior government ministers have hit back on this and other claims, including yesterday's statement from property consultants Gerald Eve that the government's figures "overestimate" savings.

Communities Secretary Sajid Javid and Treasury chief secretary David Gauke said there had been "a relentless campaign of distortions and half-truths" about the changes.

Budget 2017: Borrowing set to fall by £3bn

20 February

Next week's spring budget – the first and last to be delivered by Chancellor Philip Hammond following changes last year – will see significantly improved forecasts on borrowing and growth.

EY Item Club, "the only non-governmental forecasters who use the same model… as the Treasury", has predicted that borrowing for the current financial year will come in at around £65bn, says the Financial Times.

That's £3bn less than the figure put forward in November by the Office for Budget Responsibility (OBR) and is "largely down to the unexpected resilience of economic growth since the Brexit vote".

Hammond is likely to announce in his speech that the OBR has upgraded the growth projection for next year to "1.6 per cent, or 1.7 per cent", says The Guardian.

Last November, in the first update since the EU referendum in June, the forecast was cut from 2.2 per cent to 1.4 per cent.

Stronger growth has been based on higher consumer spending, which translates to bumper retail revenues and profits – and so higher tax revenue.

But the "optimistic scenario" is still uncertain and "depends on a big rise in self-assessment income tax receipts, thanks to people seeking to forestall changes in the taxation of dividends", adds the FT.

EY says it expects a "low-key" Budget, but that the improved figures could give room for "further steps to raise the tax-free personal allowance to £12,500 [and] a temporary cut in fuel duty", says the Guardian.

Such actions, as well as the possibility that Hammond might freeze air passenger duty, would be designed to "ease the impending squeeze on UK living standards", adds the FT.

The improved figures will not, however, lift the overall squeeze on public spending. More borrowing or tax rises would be needed to fund action on social care and the NHS, "arguably a higher political priority".

EY says the OBR is unlikely to change longer-term forecasts for growth because of the uncertainties associated with Brexit.

Last month the Institute for Fiscal Studies said that to meet the target of cutting the deficit to below two per cent by 2020 the tax burden will rise to its highest level in 30 years.

Budget 2017: Government and business in row over rates

17 February

A row is growing between the government and company chiefs over upcoming changes to business rates ahead of next month's Budget.

Thirteen employers' organisations, including the British Retail Consortium, the Confederation of British Industry and the Federation of Small Businesses, have written to the government demanding the tax be altered, says the BBC.

Several groups are also pushing for more relief to be offered for certain types of business as smaller firms and those in the hospitality sector are likely to see a big increase in rates from April.

Of main concern to the lobbyists is a clause stating the valuation of a company's property, on which rates are based, can be within the bounds of "reasonable professional judgement".

Specifically, they say this will make it harder for a business to challenge a valuation – and so a tax bill – it deems to be too high

Sky News says some experts believe this will prevent appeals succeeding on any valuation discrepancy of less than 15 per cent, at a potential cost of £2bn a year to businesses.

However, a government spokesman said: "These claims are simply false. We are not preventing anyone from appealing their bills or setting any margin of error for appeals being heard."

As for the wider costs, employers are concerned that 500,000 businesses will see an increase of, in some cases, as much as 500 per cent over the next five years.

The government argues that even more businesses will see a rates reduction, that the overall levy on businesses will be revenue neutral and that it has set aside £3.6bn to phase in increases where they occur.

Nevertheless, lobby groups say more needs to be done. A survey from the Federation of Small Businesses found the cost of rates was the biggest concern for three-quarters of small businesses in London, says The Guardian.

Communities Secretary Sajid Javid said: "The only people who should be concerned about April's changes are the scaremongering ratings agents, who are about to see much of their target audience celebrating a fall in their tax bill".

Budget 2017: 'Crippling' NHS hike adds to rates pressure on Hammond

15 February

Pressure is growing on Phillip Hammond to soften the blow of business rates hikes in his Budget 2017, as focus falls on a "crippling" £635m jump in the bill for NHS trusts over the next five years.

Industry lobby groups are also intensifying calls to offer relief for small businesses to stop online retailers such as Amazon enjoying an unfair advantage.

New business rates, which are levied on companies with commercial premises, come into action in April, the first time they have changed since 2008. They will see firms' rates reassessed to take into account the rise in property values over the last nine years.

The government says the reform will be revenue neutral and has set aside £3.6bn to phase any increase in costs in over five years.

However, half a million smaller firms, pubs and restaurants, most located in south-east England, will see their bills rise by up to 500 per cent.

The Daily Telegraph adds that a new analysis carried out by property consultant Gerald Eves found rates costs for NHS hospitals will rise from £328m this year to £418m in five years' time and from £257m to £332m for GP surgeries.

Even taking into account the tapering of the government's transition funding, the cumulative additional cost by 2021 will amount to £635m.

More than 150 health authorities are threatening to mount a test case against a local authority unless they get a discount on the tax.

It emerged last year that cash-strapped NHS trusts are seeking to be recognised as charitable organisations, which would qualify them for an 80 per cent reduction in business rates.

At the time, the trusts were also seeking backdated rebates totalling £1.5bn.

The Chancellor is also facing demands to help small businesses after it emerged that the likes of Amazon will benefit from the rates review.

A new study has found the overall business rate bill for the internet giant's nine UK warehouses will fall by £140,000 from April, The Independent says.

"Other online retailers which may benefit from the rate change include Asos and Boohoo," the paper adds.

Stephen Martin, director general of the Institute of Directors, which commissioned the Amazon analysis, said: "The government must take action to relieve… the pressure on small businesses."

Pubs and restaurants demand business rates relief

13 Feburary

A trade body representing pubs and restaurants all over the UK has warned the Chancellor that there will be mass closures on high streets unless he offers tax relief in next month's Budget.

From April the business rates paid by companies that trade out of physical properties are changing as re-calculations from a review already delayed by two years finally come into effect.

Rates are related to property values and are usually updated every five years. The delay means that this year the changes to existing rates are substantial and will create "big winners and losers", says The Times.

"Rates will fall for 920,000 businesses, remain the same for another 420,000, and increase for 510,000," the paper adds.

Companies set to lose out are mostly in south-east England. Many are in the hospitality industry, with some pub landlords saying they will eventually face rates increases in excess of 500 per cent.

A £3.6bn transition relief scheme will ensure these costs are phased in over five years, but from this year ministers have increased the cap on bill hikes from 12.5 per cent to 42 per cent.

The BBC says the reforms will be "revenue neutral" for the Treasury, but the Association of Licensed Multiple Retailers says the government needs to invest more to soften the blow further.

In an open letter to Chancellor Philip Hammond, the trade body warns that the hospitality sector is facing additional costs of £300m to £500m a year. It says the government should introduce a permanent sector-specific relief.

A spokesman for the Department for Communities and Local Government said: "The great British pub is a national asset, providing thousands of jobs and boosting the economy by £21bn a year.

"The method of valuing pubs was agreed by the five major trade bodies and has not changed.

"Following the revaluation, three quarters of properties will see no change or even a fall in their bills, and the small minority of businesses that face an increase will benefit from our £3.6bn transitional relief scheme."

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