Budget impact concerns for Dumfries and Galloway

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The region’s small and medium sized businesses are in the UK Government’s Budget “firing line” – warns Dumfriesshire MP David Mundell.

The Tory MP claims announcements on Wednesday – the first by Chancellor Rachel Reeves – pose a “direct threat to the businesses which are the “the backbone of the local economy” in Dumfries and Galloway due to the Labour government’s decision to hike up national insurance contributions paid by small and medium sized operations as part of an overall £40 billion tax hike.

Mr Mundell has also hit out at the budget for “offering no guarantees that extra funding will find its way into public services across his Dumfriesshire constituency”.

An expected rise in fuel duty was averted after sustained lobbying of the government – including by Mr Mundell who has long opposed an end to the 14-year duty freeze, which he believes is essential in helping motorists in rural areas.

He said: “After heavy lobbying of the government by many MPs representing rural constituencies, including myself, the expected hike in fuel duty did not materialise and that is to be welcomed.

“It’s clear that lobbying made the difference, but also that we will need to continue to maintain pressure on ministers to ensure no increases in future years.

“The government’s decision to push up employers’ national insurance contributions, while drastically lowering the threshold at which they become payable, will have come as a very unwelcome shock to many small and medium sized businesses, which are the backbone of our local economy.

“The double hit of increased contributions along with a lower threshold, risks disproportionately affecting those businesses already struggling with high costs and a difficult trading climate.

“While extra funding has been confirmed for Scotland, there is no actual guarantee that this will find its way into essential frontline services locally like the NHS, schools, and policing.

He added: “Decisions over the funding of those services here in Dumfriesshire will come in the Scottish Government’s Budget later this year and all eyes will now be turning to that.”

Dr Liz Cameron CBE, chief executive of the Scottish Chambers of Commerce has also voiced concern and caution: “We welcome the additional £3.4 billion of funding for Scotland but as always the devil is in the detail, and we need to see a full breakdown of how this will be utilised to support economic growth.

“As we look ahead to the Scottish budget, we urge consequential funding to be utilised to support the business community, particularly on non-domestic rates and planning, to ensure a level playing field with the rest of the UK.”

On National Insurance Contributions, Dr Cameron said: “The increase in employer NICs and the reduction in the secondary threshold at which businesses have to pay it is a double tax hit for firms.

“Firms are bearing the lion’s share of plugging the £40 billion fiscal funding gap cited by the Chancellor, with the increase in employer NICs accounting for half of this. However, increasing the Employment Allowance from £5,000 to £10,000 will support Scotland’s micro and small businesses with less than ten employees and this is to be welcomed.

“Many businesses will be unable to absorb these costs and will have no alternative but to pass onto consumers. The scale of this additional cost will mean that pay rises and additional staff hiring could go on hold, or new jobs won’t be created.”

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