Underwhelming Budget a consequence of political reality

Posted by Paul Cherpeau

Chief Executive

Fri 24th, Nov

Depending on whose opinion you listened to in advance of his speech, Wednesday’s Budget announcements were either the most important or irrelevant in living memory.

There was an underwhelming feel to proceedings throughout the build up and in the aftermath, although some of the announcements will be welcomed by businesses there is a prevailing sense of political reality impeding ambition to give the economy the shot in the arm the country needs to build, build and build.

First up, the positives. The business rates rise of 3.9% in April was partially mitigated by the bringing forward of the calculation of interest by CPI rather than RPI. A rise of 2.9% will still be incurred but the full rate rise has been avoided thanks in part to the joint lobbying by British Chambers of Commerce, the CBI and FSB.

There was a reaffirmation that digital infrastructure and 5G / fibre connectivity will be a key asset in the country’s competitiveness. How this will manifest itself remains to be seen but the prospect of even greater connectivity within our own conurbation is to be welcomed.

The maintenance of an £85k VAT threshold was also a wise move for the moment whilst there is no ‘soft-landing’ for self-employed and micro businesses who incur VAT for the first time. Also, there was no announced uplift of Insurance Premium Tax.

Much of what remained was fairly limited in scope and large on rhetoric. The stamp duty elimination for first time buyers is a minor solution to a much bigger problem. The Chancellor himself articulated in the preceding sentence to the announcement that it was cash shortfalls that stops young people getting on the ladder and if social mobility and home ownership aspiration is to be a realistic prospect, policy needs to reflect the difficult position that savings-deprived young people are in when it comes to mortgage applications.

Businesses were eager to see a budget that lifted the burden of input taxation but, with the exception of the business rates switch, such commitments were in limited supply. The political situation perhaps negated the prospect of ‘big and bold’ being the theme for the budget but there remains a lack of treasury confidence to commit to big infrastructure spend. Disappointingly, there is little suggestion that input taxes will be reduced as the government pursues its Corporation Tax roadmap. We hope a freeze to the roadmap and a commitment to limit the imposition of new input taxes will be forthcoming in the New Year.

On Brexit:

The commitment to a contingency Brexit fund was a political necessity but will do little to dispel genuine business concerns that the government is willing to accept a ‘hard Brexit’ without the necessary ‘implementation period.’ Movement on negotiations and the resultant clarity of direction is a critical to enable businesses to appropriately plan and to be reassured that the free and frictionless trade arrangements mooted by the Chancellor are realistic to achieve.

On Skills:

Failure to clarify or commit to the redistribution policy of apprenticeship levy spend across company supply chains are frustrating, given the six months experience already obtained within the new apprenticeship funding regime and the consequential impact on apprenticeship starts in the period. The reaffirmation of T-Levels was notable as, although further details will be forthcoming, there has been some scepticism related to their introduction, the available funding and capacity-building ability of providers.

On infrastructure:

Commitments to the delivery of mobile connectivity on the Transpennine railway and the £1.7bn ‘Transforming Cities Fund’ are welcome but sustained funding and a commitment to progressing electrification of railways in the North with the longer term aspiration to build Northern Powerhouse Rail are the necessary next steps to rebalance and grow the economy.

Perhaps it is telling that the big headline of the budget was not in the policy but in the Chancellor’s statement of OBR growth projections for the coming years. There is no doubt that forecasting looks bleak for economic growth but Chambers of Commerce and Bank of England data indicates a relatively positive outlook for business relating to productivity and wage growth. Brexit looms large on an ever diminishing horizon, and trade talks need to commence soon.

The Chambers of Commerce throughout the country will continue to lobby government on behalf of business with quantitative and qualitative information that reflects the prevailing voice of business. Do join us in the conversation.

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