The Chancellor delivered his first budget, a month after taking over the reins with HM Treasury (HMT) and against a tough backdrop.
A budget for today
In the short term, the UK is standing on the cliff-edge of a national health crisis. Covid-19 is threatening both people’s health and wellbeing, but also the UK’s economic future. With parts of the country still reeling from the last financial crisis, the threat of another economic collapse needed an impressive economic response, which this budget delivered.
This included much welcomed support for people, to ensure they are financially able to act on medical advice and self-isolate, and for businesses, particularly smaller firms less able to bear the costs of a potential shut down. Small and medium-sized enterprises (SMEs) make up 99% of businesses in the country, and in some parts of the country, such as the South West, they account for 70% of private sector jobs.
Supporting these companies will be key to helping these regions weather the economic effects of this potential health crisis. However, as the situation develops, larger firms may also need support, particularly those anchor institutions who act as major employers within their region.
A budget for the future
But this budget went further, setting out the country’s economic ambition for the future. CBI members have long been calling for decisive action on vital long-term issues in order to address the country’s stagnating productivity levels.
HMT’s own analysis shows that not only did productivity not improve at all in 2019, but as a country, our level of productivity is more than 20% lower than other major advanced economies. With productivity growth a key driver of wage growth and of improvements in living standards, this needs to be a priority if the government is to meet its ambition for levelling up the UK economy.
There is much to celebrate within the budget for English regions, with several specific CBI wins.
What we are celebrating
- Significant infrastructure projects received new and improved backing, including the long-promised dualling of the A303 in the South West, the A66 Trans-Pennine Route across the North, or a Midlands Rail Hub
- Commitment to the Transforming Cities Fund and digital infrastructure got a much-needed boost through investment in rural connectivity, particularly in hard to reach spots
- Devolution in Yorkshire, with the West Yorkshire Deal announced. This will provide £1.1bn investment over the next 30 years, but also opens up the region to new opportunities
- The announcement to allow all Metro Mayors to have greater say on their intra-city transport arrangements through a £4.2bn settlement to address urban transport needs
- Development of the Oxford-Cambridge Arc, to include a Spatial Framework to facilitate growth whilst addressing the ‘growing pains’ in areas such as housing and infrastructure
- Announcements to support carbon capture and storage as part of the UK’s commitments to meet net zero targets, likely to support our largest industrial clusters across the English regions
- A commitment to reform the Green Book, ensuring future investment can allow all parts of the country to reach their growth potential.
What did the Budget miss?
Whilst there were some real positives for regions from this Budget, there were also some disappointing omissions:
- The Industrial Strategy did not feature at all
- Further delays on the consultation on the UK Shared Prosperity Fund.
Whilst we have been reassured that the crucial Industrial Strategy initiative is underway, with a number of Local Industrial Strategies even ready to be published, the lack of mention once again suggests a downgrading within government. More must be done to reassure business, and regional stakeholders, that this is not the case.
The UK Shared Prosperity Fund is set to replace existing EU funds, aiming to support long-term, sustainable, and inclusive growth across all regions.
With the existing funding coming to an end in 2021, any new bids for further funding need to be made in 2020, but with the consultation already two years overdue, and pushed back to the Comprehensive Spending Review, it is likely many key regional projects will face a funding cliff edge and uncertainty.
Next steps
The CBI will be responding to the upcoming Devolution White Paper, as well as working closely with all the Mayoral Combined Authorities as they shape their priorities following these new announcements. If you would like to get involved, please contact Hannah Richmond.