A competent Budget for today, but lots to do tomorrow
It cannot be easy delivering a Budget four weeks into your new job as Chancellor and especially against the backdrop of the World Health Organisation on the same day declaring Covid-19 a pandemic. Credit therefore goes to Rishi Sunak for a competent Budget that recognised the gravity of the current situation and offered some hope for the future.
Critically, the speech oozed assurance on the challenges of today. The emergency packages to support the NHS, workers and small businesses and the messaging that the Chancellor was prepared to intervene further, together with the interest rate cut delivered by the Bank of England, communicated that the Government appreciates we are looking at a very challenging few months and it is doing what it can.
The emphasis on public investment was also well received and if it helps to deliver ‘levelling-up’ and starts to address the UK’s productivity malaise, as it should, we can look forward with some optimism. It was also really pleasing to hear that Government is reviewing its investment appraisal techniques set out in the Treasury Green Book – a budget request of ours being pursued.
We must recognise that this is a Government barely at the end of its first quarter and we should not expect that everything that needs to be done can be done overnight. Future fiscal events, however, will need to face up to several of the long-term challenges the nation faces. The Government can’t keep kicking cans down the road, on funding social care for example, or how we deliver net zero carbon, on which there was precious little on today.
Perhaps the biggest ‘can’ for the real estate sector is business rates and the promised fundamental review needs to come quickly for the sake of our retail sector and appreciate that some businesses are simply paying too much. And, that paying too much is not just a small business problem, but one that afflicts the whole retail sector.
On housing, in normal times in the mid-noughties, an affordable housing programme of £12bn would have been regarded as respectable, but against a housing crisis and many years of far too little, it is not enough.
The secrets of any Budget are usually exposed in the policy decisions table of the Budget Red Book. The table starting on page 65 exposes the tax and spend flows. What is stark is the fiscal loosening, which starts at £18bn over the coming year, rising to £42bn in 2024/25. That last figure would have been close to £65bn, were it not for the 18% corporation tax scheduled for April 2020 being cancelled, saving £7bn, and our future contributions to the European Union stopping, saving £15bn by 2024/25.
Today was rightly about the short-term economic consequences of Covid-19 and the Government handled that well, but in the months ahead it will need to start to tackle the long-term challenges the country faces. There is lot to do, and yesterday’s budget told us little about how it will be paid for.
