Our top four reflections from the Spring Budget

In the 2023 Spring Budget, an extensive range of measures were introduced to meet the government’s priorities: halving inflation, reducing debt, and growing the economy.

We’re pleased to see a number of these measures, particularly those aiming to support people and businesses through the cost-of-living crisis, whilst also recognising missed opportunities here that government could have taken, and still can take in the future.

Here are our top four reflections for the EO community:

1. Positive news for EMI share schemes, plus a call to evidence on SIP and SAYE

 Employee owned businesses (EOBs) that use Enterprise Management Incentive (EMI) schemes to grant share options will enjoy a simplification of the scheme’s process.

  • From April 2023, companies will no longer be required to set out details of share restrictions within the option agreement, or to declare that an employee has signed a working time declaration.
  • From April 2024, the government will extend the deadline for a company to notify HMRC of the grant of an EMI option from 92 days following grant, to the 6 July following the end of the tax year.

You can find out about these changes in more detail in pieces from EOA supporter members RM2, Postlethwaite Solicitors, and Fieldfisher.

We’re also hopeful for comparable improvements to the Share Incentive Plan (SIP) and Save As You Earn (SAYE) schemes, as the Budget announced that the government will launch a call for evidence, which will be used “to consider opportunities to improve and simplify the schemes”.

Whilst this call for evidence hasn’t yet been launched, the EOA has heard that the EO sector would benefit from greater harmonisation of the SIP scheme and EOT model. Currently, EOTs are unable to gift shares into SIP trusts, and must either sell shares into the SIP at market value or issue fresh shares. For an EOB wishing to incorporate some measure of direct share ownership this can add an unnecessary level of complication and/or result in unintended tax charges on the EOT.

2. Measures to tackle economic inactivity are welcome, but don’t go far enough

With the UK’s economic inactivity rate at a significant 21.3% in November 2022 to January 2023, government is focusing on this area to stimulate economic growth. Steps such as increasing childcare provision and the DWP’s reforms to disability benefits are welcome steps that could provide individuals across less economically active groups with more better opportunities to work.

However, our view is that the decisions in the Spring Budget leave an important gap unaddressed: making work more meaningful and rewarding, financially and otherwise.

Given that one in three employees in the UK are unhappy with their job, according to Indeed’s Work Happiness Score, and the Ranstad Workmonitor finds a similar 34% of employees would rather be unemployed than unhappy in their job, it is clear that job satisfaction is a key barrier to economic activity. This barrier is compounded by the increasing lack of incentive employees find in many job roles, evidenced by the growth of the country’s in-work poverty rates.

Employee ownership can play an important role in making work both more fulfilling and more rewarding. As well as dividends from direct share ownership, or the employee benefit from the EOT often being a significant financial benefit for employee owners, particularly in lower income industries and roles, EO contributes to workplace satisfaction by prioritising employee voice in decisions on working conditions.

In terms of encouraging greater participation in an inclusive economy, the absence in the Budget of any policy decisions that strengthen EO or that enable EOBs to make better use of their ownership model is a missed opportunity.

Over the coming months, the EOA will be engaging with our members to co-produce a set of clear policy recommendations and will use these to engage with government and relevant stakeholders on behalf of and in collaboration with the EO sector.

3. Levelling up and devolution are opportunities to strengthen the EO sector

We welcome additional support for levelling up and devolution, particularly the delivery of new investment zones with additional funding and additional investment in local and regional projects.

Furthermore, the transfer of responsibility for local economic development from LEPs to Local Authorities by April 2024 is a positive step for emphasising local priorities and approaches (read more on this in the County Councils Network response).

Further devolution and local/regional investment and decision making represents a significant opportunity for the employee owned sector.

This is a space to build on the successes of the existing Ownership Hubs in South Yorkshire and London, and to explore additional collaborative pilot policies and programmes to strengthen employee ownership across the UK’s regions.

4. Government must address tax changes that disproportionately impact low-wage employee owners

No changes to tax regimes were announced in the Budget, however EOBs and employee owners should keep in mind the following implications of the Autumn Statement 2022:

  • As of April 2023, the annual CGT exemption will be reduced from £12,300 to £6,000, and then again to £3,000 from April 2024.
  • From April 2023, the annual dividend allowance will be reduced from £2,000 to £1,000, and then again to £500 from April 2024.

These changes may impact employee owned businesses and their employee owners using direct share option schemes. Whilst it is unclear how many employee owners or businesses will be affected, EOA consultation shows that these changes will disproportionately impact low-wage employee owners.

Closing comments

As always, the EOA welcomes all insights from our members on how policy might affect them as EOBs, or reflections from implications on the wider sector. To support this we will be launching our own consultations over the coming months, to develop our own policy positions, and asks/recommendations for government and other stakeholders.

In the meantime, please direct any queries or suggestions to our Policy & Partnerships Officer, Sam Blakeborough, on email to sam.blakeborough@employeeownership.co.uk.

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