Today’s Spring Budget contained several issues of interest to governance professionals.
The key headline of today’s budget had been clearly trailed beforehand. As expected, the rate of national insurance was cut from 10 to 8%. This 2p cut in national insurance was the main event as the Chancellor sought to shift the dial on the narrative of being the government of high taxes.
In reality, the economic conditions in the UK do not leave much room for give aways, even in the run up to an election and Labours’ ripost, again as expected, was to point out the overall tax burden is the highest for 70 years and the freeze on income tax thresholds and higher council tax will continue to increase personal tax levels.
Economic outlook
The OBR forecast predicts growth of 0.8% this year and 1.9% next year and that inflation, currently 4%, will fall to 2% in ‘a few months. Underlying debt is forecast to be 91.7% of GDP this year and 92.8% next year. However risks for growth and inflation remain from escalation of conflicts in Ukraine and the Middle East.
With inflation falling, real wages have risen for the past six months and there is growing optimism in the retail sector and confidence in the business sector.
Business investment has recovered strongly from the pandemic. Real business investment grew by 6.1% in 2023, faster than expected in the OBR’s November 2023 forecast.
Overall day to day government spending to grow by 1% in real terms over the next five years.
Throughout his speech, the Chancellor’s recurring theme was of promoting long-term growth, job creation, and prosperity though a combination of fiscal discipline, investment incentives and targeted policies on key sectors and geographical areas. I have captured some highlights below, however the full announcement is available in the Red Book.
Investment
Mr Hunt highlighted the government’s commitment to stimulating investment in the UK, particularly in technology, clean energy and creative industries. His budget included measures to encourage UK investment by pension funds as well as support for small businesses and to promote regional development including backing the UK’s high growth industries by making £4.5 billion available for strategic manufacturing sectors over the five years to 2030 and boosting local growth through the Investment Zones programme.
Supporting the Stock Market
The Chancellor highlighted reforms to competitiveness already underway via the Lord Hill UK Listing Review and the Edinburgh and Mansion House reforms.
The government has published a consultation on a new Private Intermittent Securities and Capital Exchange System (PISCES). PISCES will be a new innovative market that will allow private companies to scale and grow, and will boost the pipeline of future Initial Public Offerings (IPOs) in the UK.
The Financial Conduct Authority consultation on Value for Money will include proposals to on defined contribution funds to give greater transparency of UK investments. The government will also legislate to provide the Pensions Regulator with the powers to ensure disclosures on performance.
Climate Change
The Chancellor announced increasing funding for the Green Industries Growth Accelerator (GIGA) by up to £120 million to further support expansion of low carbon manufacturing supply chains across the UK.
Up to £390 million of the GIGA funding is expected to go to supply chains for offshore wind & electricity networks and up to £390 million is expected to go to supply chains for Carbon Capture Utilisation and Storage (CCUS) and hydrogen.
The government will also regulate providers of Environmental, Social and Governance (ESG) ratings to users within the UK. ESG ratings providers will be regulated by the Financial Conduct Authority.
Regulators Growth Duty
The government will extend the Growth Duty to Ofwat, Ofcom and Ofgem and publish refreshed guidance on how it should be applied. It will also publish a Regulator Performance Framework in the coming months that will encourage greater regulator agility, efficiency and responsiveness.
Workforce
Unemployment is forecast to peak at 4.4% in 2024 and 2025. Acknowledging that 10m of working age are not in employment against a background of 900,000 vacancies, the Chancellor announced policies to prioritize workforce development and to create jobs rather than fill roles through immigration. He also highlighted growth in employment outside London and the South-East and further investments in housing, infrastructure and regional development as a continuation of the policy of levelling-up.
Technology,
Despite increased spending on public services, productivity levels have not recovered to pre-pandemic levels. The government plans to improve efficiency and productivity through investment in technology, announcing £3.4bn to digitally transform the NHS and patient care.
He also announced a new £7.4 million upskilling fund pilot to support SMEs to develop AI skills and to compliment the soon to be launched SME Digital Adoption Taskforce which will support adoption of digital technology to support productivity. The Taskforce will also support the AI Opportunity Forum which will encourage AI adoption for economic growth. In addition, the government will invest up to £100m in the Alan Turing Institute over the next five years to support it's research.
David Mortimer
Head of External Affairs, CGIUKI
