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Date: 25/02/2016

This week’s policy update looks at Cameron's EU Deal, Tax avoidance, EU funding and the upcoming annual budget breakfast.

  1. A reformed relationship? Analysis of Cameron’s EU Deal
  2. Co-ordinated international action needed to stop aggressive avoid schemes
  3. UK economic growth confirmed at 0.5%
  4. Worcestershire Farm and Forestry businesses invited to bid for EU funding
  5. Hear from the Experts at the 2016 Annual Budget Breakfast  

A reformed relationship? Analysis of Cameron’s EU Deal
Following months of negotiation, Prime Minister David Cameron has struck a deal with EU leaders and agreed a package of changes to the UKs membership of the EU last Friday. The agreement, which will take effect immediately if the UK votes to remain in the EU on the 23 June 2016, includes changes to:

Eurozone – Britain can keep the pound while being in Europe and its businesses trade with the bloc, without fear of discrimination. Any British money spent on bailing out Eurozone nations will be reimbursed.

Migrant Welfare payments – The UK can decide to limit in-work benefits for EU migrants during their first four years in the UK and child benefit payments to migrant workers for children living overseas are to be recalculated to reflect the cost of living in their home countries.

Sovereignty – There is an explicit commitment that the UK will not be part of an “ever closer union” with other EU member states. This will be incorporated in an EU treaty change.

Limits on free movement – Denying automatic free movement rights to nationals of a country outside the EU who marry an EU national, as part of measures to tackle ‘sham’ marriages. There are also new powers to exclude people believed to be a security risk.

Read more here.

John Longworth, Director General of the BCC, commented:
“Businesses across Britain will be relieved that the horse-trading between Westminster and Brussels is now concluded, and that the hard work of recent months could potentially deliver some benefits for the UK. The real test for the Prime Ministers’ deal is whether it can deliver tangible benefits.”

Sophia Haywood, Policy & PR Executive at Herefordshire & Worcestershire Chamber of Commerce, said:
“Now the date is settled, businesses will need to start seriously thinking about what they want from the EU and how to cast their vote, if they haven’t already. The choice is becoming clearer, its either remaining in a slightly reformed EU or a future outside the EU which appears at the very least uncertain.”

BCC: Co-ordinated international action needed to stop aggressive avoid schemes
The Public Accounts Committee announced in a report published yesterday, that the tax settlement agreed by Google and HMRC seems “disproportionately small” and reinforces concerns that the rules governing where corporation tax is paid by multi-national companies do not produce a fair outcome.

The report calls on HMRC to “lead the way in pressing for changes in international tax rules to prevent aggressive avoidance by multinational companies.” It states that HMRC should widely consult on the case for changing rules that protect corporate tax payer confidentiality to make it open to public scrutiny.

It also expects HMRC to monitor the outcome of other tax authorities investigations, such as into Google and to re-open its settlement if new evidence becomes available. This follows Google’s announcement last month that it had agreed to pay an additional £130m in corporation tax, covering January 2005 – June 2015, following a six year investigation by HMRC.

Dr Adam Marshall, Executive Director of Policy and External Affairs at the BCC, said:
“We have been calling for co-ordinated international action to stop a small number of companies conducting aggressive avoidance schemes for some time, so we are pleased the committee has also urged HMRC to lead the way in pressing for changes.”

Mike Ashton, Chief Executive at Herefordshire & Worcestershire Chamber of Commerce, said:
“Reforms such as this are crucial to restoring trust in the tax system, at a time when many businesspeople are angry at what they see as two different sets of rules: one for them, and one for the biggest corporations.”

UK economic growth confirmed at 0.5%
UK economic growth in the last three months of 2015 has been confirmed at 0.5% according to The Office for National Statistics’ (ONS) second estimate of GDP growth. The growth estimate for 2015 was also unchanged at 2.2%, which was the slowest annual pace since 2012. The UK economy however remains one of the fastest growing of the developed nations.

There has been steady growth in the services sector, with output growing 0.7% in the three months to the end of December. However, the production sector and net trade dragged on growth.

While recent performance remains strong, George Osborne’s warning of the UK economy facing a “dangerous cocktail” of risks” this year is still a considerable threat. Global economic growth has slowed, with volatile stock markets and slumps in oil prices, there are also considerable concerns over the risk and uncertainty involved in a possible Brexit following the EU referendum in June.

David Kern, BCC Chief Economist, said:
“While our increasing reliance on a vibrant services sector means that the UK economy as a whole is likely to continue growing, our manufacturing sector is still critical to the wellbeing of the economy in key areas such as exports, innovation and productivity. Greater efforts are needed to support manufactures as they compete in the face of difficult global economic headwinds.”

Worcestershire Farm and Forestry businesses invited to bid for round of EU funding
Farm and Forestry businesses are being invited to submit an application for the next round of funding in the LEADER programme for projects which support farming and forestry productivity in rural areas or support new innovative and efficiency saving practises. Bidding applications are welcomed to provide:

Support for Farming Productivity – examples could include small scale water management investments and innovative farming practices

Support for Forestry Productivity – examples could include investments in non-timber forest products and using new forestry technologies

The range of potential capital grants will be between £2,500 and £35,000. Businesses must apply before Friday 1 April 2016. For more information and updates on the programme, visit the Worcestershire Business Central website
Hear from the Experts at the 2016 Annual Budget Breakfast 
George Osborne will stage his first full budget of the parliament on Wednesday 16 March as he seeks to steer the public finances into the black by 2020.

The Chancellor, who already has an emergency Budget and Autumn Statement under his belt since the Conservatives won the election last May, is expected to maintain a course that will generate a £10bn surplus by the end of the parliament. But will there be any surprises?

CB, Chartered Accountants and Herefordshire & Worcestershire Chamber of Commerce will be hosting their annual Budget Breakfast on Thursday 17 March 2016 at Browns at The Quay in Worcester from 7.30am.

Join our expert team including John Painter, Managing Partner of CB, Chartered Accountants, his tax partner Chris Hobbs and Mike Ashton, Chief Executive of Herefordshire & Worcestershire Chamber of Commerce for all the latest reaction. Listen to analysis of all the announcements as well as practical and innovative tips and ideas on how to plan your financial affairs in light of the outcomes.

To book your free place e-mail events@hwchamber.co.uk