KPMG responds to the Chancellor’s Spring Statement 2019
Experts at the professional services firm KPMG analyse the Spring Statement.
The Chancellor’s pre-Brexit gift from the OBR won’t go far
Yael Selfin, Chief Economist at KPMG in the UK
“Despite the downward revision to GDP forecasts, the Chancellor was given an additional £11bn headroom today to spend, thanks to better revenue forecasts by the OBR.
“The larger war chest of £26.6bn will not go far enough in the event of a No-Deal Brexit, as the economy will require a significant boost to counter the shock.
“The much anticipated Spending Review will have room for governmental spending to rise by 3% if Brexit goes smoothly and if the Chancellor decides to spend all of his savings pot. That will be better than he’s promised so far, but may not be enough to address UK twin challenges of low productivity and inequality completely.”
No Digital U-turn
Melissa Geiger, Head of International Tax and Tax Policy at KPMG in the UK
“As expected there were no major tax announcements in the Spring Statement, the Chancellor preferring to keep his head under cover amid the Brexit storm clouds.
“Some were holding their breath for an announcement on the UK’s Digital Services Tax, there were even rumours that we might see a delay. Instead the Chancellor used his speech to reiterate the need for tech giants to pay their fair share of tax. No deferral looks likely and the accompanying Written Ministerial Statement refers to a consultation on the detailed design and implementation.
“This will be a disappointment to business who are concerned at the UK going it alone with a unilateral measure when the general consensus is that an international solution is needed.
“It is perhaps ironic that at the exact same time the Chancellor reiterated his intention to continue with a unilateral UK Digital Services Tax, representatives from around the world are also meeting in Paris as part of the OECD’s work to try to flesh out the urgently needed global solution.”
Deal dividend ready for release
James Stewart, Head of Brexit at KPMG
“British businesses have a two and half year backlog of major restructuring, cost management and investment decisions to make. As the Chancellor said today, there is a deal dividend waiting to be released if political agreement can be achieved. Given the volatility of the next few weeks this may be more of a hope rather than an expectation.”
£3bn pounds affordable homes guarantee scheme welcome, but more innovation needed
Jan Crosby, UK head of housing at KPMG
“Amidst the ongoing Brexit saga, the UK’s housing problem risks being eclipsed. Yet the problem of under-supply of our nation’s much needed homes remains. The chancellor did nod towards the progress made – which is promising – but we must not forget that we are playing catch-up and are nowhere near the aspiration to build 300,000 new homes each year.
“The dazzling takeaway from the statement will undoubtedly be the announcement of the £3bn affordable homes guarantee scheme, aiming to support the delivery of more affordable homes. However, whilst £3bn is a substantial sum and more investment is certainly welcome, we have to ensure that this doesn’t feed into any form of house price inflation – coordinated action is what’s needed here.
“Such coordination around place-making has been evident in recent announcements, with noise around consultation on infrastructure finance and planning getting more of a review, but in my mind it is innovation that is lacking. Thinking of alternatives – like an employer-backed nomination scheme, for example – is what will finally ensure the UK gets our housing problem under control.”
Chancellor takes step in the right direction to keep UK academia competitive
Punam Birly, Employment & Immigration Partner at KPMG
“Whilst PhDs have historically always received preferential treatment in the UK Tier 2 visa allocation process, the exemption announced by the Chancellor provides certainty to universities and academics studying in the UK that those applying will receive a visa if they meet all other requirements. This is good news for our research institutes and innovating businesses, who will benefit from this exemption from this autumn.
“The timely decision that overseas research activity, will now count as residence in the UK for the purpose of applying for settlement, will be particularly helpful for researchers from the EU who will not be unfairly penalised for time spent overseas conducting vital fieldwork if they want to apply for settled status in the UK. The Government has also proposed in the Immigration White Paper on the new migration system from 2021 that students will be given more time to stay in the UK and look for employment after their studies. Our universities rely on being able to continuously attract high calibre researchers from overseas, so this is a positive step in demonstrating our commitment to securing talent - keeping our world class universities competitive.”
New travel allowances are a boon to UK tourism industry
Rich Aston, Director in KPMG’s Leisure team
"The Chancellor has announced two new initiatives which aim to improve customer experience for those travelling to the UK. Paper landing cards are set to be abolished, and citizens from the US, Canada, New Zealand, Australia, Japan, Singapore and South Korea will have the opportunity to use e-gates at UK airports and Eurostar terminals from 2019.
"Any moves to improve the experience for inbound travellers to the UK is great news for the UK tourism industry. Even though filling out a landing card and queuing at passport control may seem like a small part of the overall travel experience, it is often the part that tourists enjoy least. The use of e-gates especially has the potential to encourage repeat visits to our shores as journeys become smoother and less disrupted by unnecessary admin.
"With uncertainty around the future of the UK’s relationship with Europe at its peak, offering ease of travel for tourists from further afield is a sensible step forward, and will be welcomed by the UK tourism industry as they build their own plans for the future."