Joint Budget and CSR 2021: what was announced and what it means for business

It was the second Budget of 2021 and the first multi-year Spending Review since 2015. Set in a post-Brexit environment and against stronger economic recovery than expected, this joint Budget and CSR was planned to be forward looking and optimistic. One of the first real opportunities for the government to start delivering on its manifesto commitments and its Plan for Growth. 

But the reality, was somewhat mixed for business. While there were some definite wins, there was also significant missed opportunity. 

What did we see in the Budget? 

• R&D: the Chancellor announced that HMT would be modernising R&D tax reliefs, expanding the qualifying expenditure to include data and cloud computing costs. A policy that the CBI has been calling for, this will ensure the system keeps pace with modern R&D practices and remains competitive. We also saw the commitment of £22bn on R&D by 2026-27. Somewhat right of the original £22bn by 24/25 but still crucial to the UK’s prospects for leading in the industries of the future and global competitiveness. 
• Skills: Places on Skills Bootcamps will quadruple. Giving firms some much need flexibility for training and skill development. The CBI will continue to work with government to ensure that this type of flexibility is seen across the skills landscape, notably for apprenticeships. 
• Business Rates: a new temporary business rates relief in England for eligible retail, hospitality and leisure properties for 2022-23, per company. A freezing of the business rates multiplier in 2022-23 and progress on incentivising investment in, and decarbonisation across, property stock through a pause on higher business rates bills for 12 months after making qualifying improvements. 

What didn’t we see? 

• Business rates: Wholesale reform which goes further in reducing the burden for these businesses remains a key priority. The high burden of business rates must be addressed, to enable businesses to cope with the increased costs of doing business and to unlock business investment.  

• What comes next after the super-deduction: With the super-deduction set to end in March 2023, the CBI will continue to work with government to see what should come next. The super-deduction started with the right focus to incentivise investment but we need to finish the job beyond 2023 by committing to full expensing for capital expenditure, building confidence to invest now for those with longer-investment cycles.  
• The right levels of funding for decarbonisation: the overall scale of public investment doesn’t match up favourably with other countries seeking to support the green transition. We estimate that public investment since the announcement of the Government’s ‘10 Point Plan for a Green Industrial Revolution’ amounts to 1.2% of GDP, whereas packages in the US and EU are at 3.8% and 1.8% respectively. 

What about the forecast for the economy? 

The OBR published an updated forecast, giving us a clearer picture of the outlook for the UK economy as it recovers from the pandemic. On the economy, the outlook is much more positive given the successful vaccine rollout and GDP growth is expected to reach 6.5% in 2021. Unemployment estimates for this year have also been revised down to 4.9% from 5.6%. On the public finances, borrowing in 2020-21 is £35bn lower than forecast in March, due to large underspends by government departments. The improved fiscal position means debt will peak at 98.2% of GDP this year.

And what does it all mean for business? 

When looking at the Budget, it’s hard to pinpoint many policies that will really stimulate the needed investment revolution both domestically and for FDI. As noted by the CBI’s Director-General, Tony Danker “This Budget alone won’t seize the moment and transform the UK economy for a post-Brexit post-COVID world. Businesses remain in a high tax, low productivity economy with concerns about inflation.” 

So while the Budget and spending allocations for governmental departments can be seen as taking things in the right direction, they are not the final destination in creating a long-term high growth, high productivity and investment-driven UK.

Next steps 

With this being the last (expected) major fiscal event of the year, focus will now be set to 2022 and working with the government to deliver on its commitments from the CSR.  

We’ll be spending the next few days and weeks feeding in member sentiment to the Chancellor, Treasury teams and wider government and will continue to work with government on supply-chain challenges.  

And with this continued unsettled environment, we might see another Spring Budget in March. In preparation, we’ll be holding virtual rooms for members to feed in their priorities, utilise our Q4 Councils, Committees and Finance Director Network sessions accordingly plan our campaign work to ensure we keep pushing on what wasn’t achieved today.