Being the first Budget in 18 months, this Spring Budget was always going to sit in a brighter spotlight. Add to that Brexit and a brand new Chancellor, and you have a very high profile event. And that’s before you even get to Covid-19 and the impact it may have on the economy. Quite the feat for a new Chancellor.
The day started with a bang, with the Bank of England announcing a number of measures this morning to support economic activity and credit availability in light of disruption from Covid-19. As the UK responds to the immediate challenge, people are the first priority. So, the measures to expand and ease access to sick pay and benefits are vital to protect people’s health and livelihoods. The Chancellor’s actions on business rates, emergency funds and loans will help ensure firms – especially smaller organisations – can weather the storm. Larger firms may also need support as the situation develops. Covid-19 will bring new challenges daily which will need to be resolved, and at speed.
What did we see in the Budget?
- Research and development: the Chancellor used this opportunity to announce £22bn in R&D spending with detailed announcements around the creation of a UK ARPA and funding for the science institute in Weybridge
- Infrastructure: investment in the strategic roads network and potholes will be hugely welcomed. Coupled with the decision to go ahead with HS2 ahead of the Budget, this is a significant package
- Levelling up: this Budget, we saw increased funding envelopes for metro mayors and the announcement of the West Yorkshire devolution deal
- International: while we will have to wait until the Spending Review to get detailed trade policy plans, new export loans and funding for embassies are a good first step.
What didn’t we see?
- Skills: while a consultation for the National Skills Fund was launched, there was a lack of mention of skills and the Apprenticeship Levy in particular. One to watch out for in the Spending Review later in the year
- Energy efficiency: all eyes are on the UK this year ahead of COP26, so there will be a need to outline detailed energy efficiency plans later in the year
- National Infrastructure Strategy: while there were huge spending promises for infrastructure, the National Infrastructure Strategy behind it is delayed
- Insurance Premium Tax and Entrepreneurs Relief: prior to the Budget, there were lots of rumours about the possibility of raises to Insurance Premium Tax (IPT) and the complete removal of Entrepreneurs Relief (ER). While we did see some changes to ER, we didn’t see it completely scrapped – and there were no changes to IPT.
And what does it all mean for business?
- Some good moves on the R&D tax credit: we were expecting an increase of the R&D tax credit and a consultation into widening the opportunities to include data and scope. It was good to see this in the Budget
- Structures and Building Allowance: the Chancellor confirmed and increase to 3% of the SBA, further incentivising businesses to invest
- Business Rates review: the fundamental review of the business rates regime will be greatly welcomed by businesses and was a key CBI recommendation in our Budget submission.
With so much focus on this one day and the significance of the government’s actions in light of Covid-19, it’s easy to forget that we are very much at the start of a fiscal event year, with two further key events likely taking place: the Spending Review (covering a five year period) and another Budget in the autumn. Today marked an important position for this government, laying the groundwork for the next few years. All eyes will be on the events later this year to see what this groundwork translates into.