PwC on the Budget aftermath: Part One

PwC on the Budget aftermath: Part One

Following the chancellor’s Budget announcements, firms are providing their initial thoughts on what has been decided

Although many firms predicted that this year’s Budget would be far softer in approach, the chancellor has been surprisingly forthright with the various changes announced.

One area that will be welcome to many is the promise of increased health funding, with an emphasis on mental healthcare.

David Morris, PwC public health leader, said: “The further funding for mental healthcare, and clarity of how these important funds will be spent, is welcome news. Mental health remains a significant issue affecting large parts of the population, and increased funding and attention on this sector is important.

“We await further details on the NHS plan for the next 10 years in the coming months. New money is not enough – it must be accompanied by new thinking and new approaches to ensure it makes a real difference. The way money flows in the NHS financial system needs to be fundamentally changed so that money entering the system is put to best use for patients.”

By far one of the most read about topics on Accountancy Age, ahead of the chancellor’s speech, has been the subject of IR35.

Julian Sansum, employment tax partner at the firm, has said: “The extension of the public sector IR35 reforms to the private sector was widely expected, and it is welcome that the Chancellor has listened to representations regarding the timing of the changes. The reforms will put a significant burden on business at a time when contingency planning for Brexit is already stretching resources, so an implementation date of April 2020 provides some time to prepare. The Chancellor has listened to representations from smaller businesses and will only extend the rules to large and medium sized enterprises.

“Having a single set of rules for taxing contractors in both the public and private sectors is a sensible step, but the impact of these reforms should not be underestimated, and arguably represent the most significant changes to the operation of employment taxes for many years.”

“There will be direct cost implications for businesses which decide their contractors fall within the IR35 rules, largely driven by employer NIC and Apprenticeship Levy totalling 14.3% which will be chargeable on contractor fees,” Sansum continued. “In addition, businesses will need to make the necessary changes to their systems and processes, which could be complex.

“Furthermore, businesses will need to question whether this opens the door for further reform on the extension of employment rights to contractors.  We have already seen some claims for employment rights such as holiday pay being brought to tribunal as a result of the public sector reforms, and the changes announced today are likely to increase the volume of those types of claims.  Businesses will likely need to rethink their contingent workforce engagement model, particularly in sectors where they cannot recover full VAT where a direct employment arrangement may now be more efficient from both a cost and risk management perspective.”

There has been an ongoing debate that the government will focus on short-term solutions, due to the uncertainty caused by the likes of ongoing Brexit negotiations.

Dan Burke, PwC’s public sector strategy partner, has argued that public service leaders have been provided with “short-term cash”. Whilst this will help to cover the “major pressures in areas such as social care, universal credit, roads, housing, and defence,” it remains to be seen whether this will allow for long-term solutions. All the big decisions that will outline the future more certainly “will have to wait until next year’s Spending Review,” Burke concluded.

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