As the government navigates its way through uncharted territory, with Brexit negotiations looming, Chancellor Philip Hammond’s autumn spending review at the end of November offered no great giveaways and no great shocks either. But, drill down into the detail, and there was a carrot and stick approach with implications for wholesale.

In the short term, gains were made in the continued freezing of fuel duty until April 2018 and the renewed commitment to reduce corporation tax from 20% to 17% by 2020 – a measure previously announced.

But what the Chancellor gave with one hand, he took away with the other. Most pressing for wholesalers was the announcement of the pledge to up the National Living Wage for over-25s from £7.20 to £7.50 an hour next April.  

An initial estimate made by the Federation of Wholesale Distributors (FWD) is that this will affect 20,000 employees of FWD members and add £12.4m to wholesalers’ wage costs next year – the equivalent of 546 full-time jobs.

FWD chief executive James Bielby, says: “While we support rises in the remuneration of the least well-paid, it is not sustainable to absorb another rise from April next year. If the government continues to pursue above-inflation increases, the result will be higher costs for consumers, stalled investment in the supply chain and eventually job losses.”

Included in the small print was the announcement that the insurance premium tax (IPT), which was hiked twice from 6% to 10% when George Osborne was Chancellor, will be raised to 12% from next June, making this the third rise in two years.

The IPT, first introduced in 1993 by the then-Chancellor Kenneth Clarke, is a tax on insurers; they then decide whether to pass it on to their customers.

For businesses, it affects payments including premises cover and motor insurance, and has been dubbed the ‘stealth tax of our time’ by the RAC. Indeed, Paul Johnson of the Institute of Fiscal Studies, says that the cost of the fuel duty freeze was “near enough offset by the increase in the IPT”, a move that he called a “fiscal infelicity” by the Chancellor before urging a “serious look” at how motorists are taxed going forward.

Better news for wholesalers came from the government’s commitment to longer-term investment in transport infrastructure and technology.

Announced to great fanfare was a £23bn National Productivity Investment Fund to be spent on innovation and infrastructure over the next five years. Included in that figure is an allocation of £1.1bn to upgrade local roads throughout England, and £220m to be spent nationally on reducing traffic pinch points.

Around £390m will be ploughed into future transport technology, including driverless cars, renewable fuels and energy-efficient transport.

In technology, a £1bn investment has been allocated to support the private sector in rolling out more full-fibre broadband by 2020-21. Funding will also support trials of 5G communications.

While long-term investment will benefit the industry and has been welcomed, it comes as little relief for those faced with short-term costs from pension auto-enrolment, the incoming Apprenticeship Levy, slower growth and rising prices caused by the post-referendum plummet in the value of the pound.

Above all, the Chancellor’s rather mute but pragmatic spending review had the feel of a government bracing itself for uncertainty. If the government triggers Article 50 before the end of March as promised, fallout may prevent larger infrastructure plans being translated into action, which will in turn have an inevitable impact on investment and jobs.

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Helena Drakakis is a journalist for betterWholesaling. Liaising with some of the leading suppliers and industry experts, she aims to bring wholesalers the best advice, latest news and inspiration.


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