Right noises on social care funding, but women still have a raw deal on pensions - KPMG reacts to Spring Budget
Experts from top firm KPMG have responded to Philip Hammond’s first ever Budget.
KPMG criticised the fact that the Government did not act to make women’s pensions fairer, and warned the NHS social care fund may not release the service from strain. The firm predicted the decision to invest in technology for driverless cars would save the UK money in the long term, it also welcomed the £300m rate relief fund for local authorities. The company also urged the Government to look again at the NIC hikes.
A missed opportunity to bridge the pensions gender gap
Commenting on what today’s Spring Budget means for UK pensions, David Fairs, Pensions Partner, said:
“Given that we are already awaiting Cridland’s review of state retirement age, the Government’s review of auto-enrolment, the Pensions Bill on Master Trust regulation and the outcome from the Pensions Green paper, the fact that today saw no major changes to pensions is welcomed.
“However, whilst we are awaiting the outcome of the auto-enrolment review, it is a shame that on International Women’s Day nothing was done to give women a fairer deal when it comes to auto-enrolment. Those in part time, and low paid, work which are more prevalent forms of employment amongst women, currently get a raw deal. If we simply reduced the auto-enrolment trigger to £5,000 a year and made 100 per cent of salary eligible for contributions, this would go a long way towards closing the gap between women’s and men’s pension provision. It would also mean more people are saving, and crucially, more people are saving a meaningful amount.”
Commenting on changes to qualifying recognised overseas pension schemes (QROPS) transfers, David added:
“There could be some unintended consequences in the proposal to impose a new 25 per cent tax on anyone transferring a pension to a different country to the one they live in. This is designed to discourage people from transferring their benefits to a jurisdiction just to enjoy lower taxes. The charge will not apply where someone genuinely moves and lives in the same country as their pension, but the problem is that this isn’t always possible. So for example, someone emigrating to the US is not able to transfer their UK pension there because of an incompatibility of US and UK rules. An expat in that position might want to transfer their pension to an offshore centre so that they could convert their pension benefit into US dollars but they too will now face a hefty tax.”
Chancellor gifted with OBR upgrade, as UK prepares for new future
Yael Selfin, Chief Economist at KPMG UK, commented on today’s Spring Budget:
“The Chancellor was handed a gift by the Office for Budget Responsibility in the form of an upgraded outlook for 2017, in anticipation of more resilient consumer spending. However, expectations for GDP growth in later years were scaled back slightly.
“The major changes to his spending plans included around £2bn increase in social care funding over the next three fiscal years, which in total amounts to ten per cent of spending on social care in 2015-16, and £2.2bn for education, which in total amounts to only 2.6% of education spend in 2015-16.
“While the Chancellor stressed the importance of improving UK productivity performance, no further spending was announced beyond the support for education. No doubt the Chancellor is saving as much as he can for any possible deterioration in the economic outlook later on. More would need to be done in order to make the UK fit for its new future, but with current uncertainties and relatively strong growth, the Chancellor has some time on his side.”
£300m rate relief fund will reveal local authority intentions ahead of full devolution
Joanna Killian, Partner and Head of Local Government at KPMG UK, comments on the Spring Budget:
“The £435 million in further relief to support for businesses affected by upcoming revaluation was expected and will be welcomed by many. Local authorities will also be encouraged by the flexibility afforded by the £300 million earmarked for discretionary relief. Together the initiatives represent more than half of all new business rates support announced in this Budget.
“The high profile nature of the business rates debate will continue as we get closer to full devolution in 2020. For local authorities, their priorities will now be to forge closer relationships with their local business communities to better understand their needs and those of the economy, while also maintaining a sustainable revenue base. The way in which authorities tackle the challenge of allocating the new £300 million discretionary fund will reveal the sector’s approach before full devolution.”
Chancellor delivers £2.4bn lifeline for health and social care, but is it sustainable?
The Chancellor has delivered a lifeline for health and social care today, by committing to speed up the hospital discharge of elderly patients, reducing dangerous waiting times in A&E, and funding to progress Sustainability and Transformation Plans (STPs).
Jason Parker, Head of Health, at KPMG says: “The Chancellor made the right noises today. The £2bn promised to social care, which should speed up appropriate discharge of elderly patients, will be a relief to the NHS to some extent, and I don’t think we could realistically have expected more. But the Chancellor did not outline where the money would be spent. Whilst the £2bn is welcome, NHS finances remain under strain.
‘The Chancellor is making the right noises on social care, but the NHS remains under strain’
“The announcement of a £100m investment to roll out GP triage to reduce waiting times in A&E is in my view well overdue, and has already proven to be successful in hospitals across the country over the past decade. However, it’s disappointing that the Chancellor failed to announce measures on wider prevention – to keep people out of A&E in the first place. Prevention is about much more than smoking cessation schemes.
“The £325m injection to progress the STPs, which we had hoped would be announced in the Autumn Statement, will be vital to help the programme move from planning to the reality of difficult execution. My concern however with the Chancellor’s promises, is that this funding will quickly be absorbed when spread across 44 STPs. But on the upside, the funding does show continued government support to STPs, so the programme is unlikely to be shelved.”
KPMG points out ‘elephant in the room’ as Chancellor hikes NICs for self-employed
As the Government looks to level the playing field between the employed and self-employed from a tax perspective by closing the gap on National Insurance Contributions, KPMG’s tax partner Colin Ben-Nathan responds:
“Whilst the Chancellor announced the beginnings of an alignment in taxation between the employed and self-employed with a rise in the class 4 NIC rate from 9% to 10% from April 2018, the elephant in the room is employers’ NIC which, as the name suggests, applies only to the employer. At 13.8% this is a material cost to employers at a time when automation and offshoring means that jobs are increasingly under threat.
“It is clear that with the rise of the gig economy, the differences between employment and self-employment are becoming harder and harder to discern. We hope employers’ NIC is something which the Government will consider further when the Taylor report is published later this year.”
Find more responses to the Spring Budget by KPMG's experts here: https://home.kpmg.com/uk/en/home/insights/2017/02/spring-budget-2017.html
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