The final fiscal event of this parliament was intended to be a crowd-pleaser, especially for those in the crowd that save, live in the North, have an interest in science and technology, drive and like a pint or two (but not at the same time).
The format will be familiar – a trot through the economic and fiscal performance of the UK followed by some new policy measures aimed at meeting the government’s growth ambitions.
If the first half of this speech was a brief economic history of the coalition, the Chancellor didn’t find himself short of positive things to say. He will no doubt have been cheered by another tranche of pretty solid labour market indicators this morning, which showed continued growth in employment.
The Office for Budget Responsibility (OBR) forecast upgrades for GDP growth this year and next again allowed the Chancellor to take some credit for presiding over one of the best performing developed economies. That said the revisions to GDP growth were, perhaps, not as large as some were expecting, with the OBR commenting that the outlook is tempered by weaker prospects for exports and North Sea activity.
Still, the fact that business investment and manufacturing have been doing more to support growth in the past five years was worth pointing out – even if both component of the economy were recovering from a pretty low base.
Deficit down (a bit)
Borrowing is also expected to come in a bit lower than the OBR’s projections at the Autumn statement – lower welfare spending and higher income tax receipts will more than make up for large downgrades to North Sea revenues over the next few years.
A slug of new revenues from asset sales (main Bank assets) also allowed George Osborne to say that the government will in fact meet its commitment at the start of this parliament to have a debt as a percentage of GDP falling by now.
Even if we take all this as good news, the deficit still looms large over the next parliament and the Chancellor didn’t make the future challenge of deficit reduction any more difficult by loosening the purse strings with unfunded sweeteners. As has been the case in past pre-election Budgets, prudence made her presence felt.
Checking off the to do list
Still, the reprioritisation trick hasn’t got old yet. Loop holes are being closed, banks will be tapped up with a higher levy and tax avoiders will be chased down. All of which provided enough wriggle room for a few giveaways.
The main beneficiaries in cash terms are tax payers who will benefit from increases in the personal allowance, savers who get some new savings products and drivers who won’t face a fuel duty increase this Autumn.
… and for business
In addition, the Chancellor rightly responded to the real challenges facing companies engaged in North Sea oil and gas activity with a comprehensive package of measures to kick start exploration and investment. This will provide very welcome secondary benefits to the manufacturing supply chain.
There was also some partial relief for energy intensive sectors with an earlier than planned introduction of compensation for small scale feed in tariffs – a definite help, but not as much as hoped for.
A couple of other notable new measure include:
| The government announced additional funding for UK Trade and Investment (UKTI) activities in China. Funding was also announced for a series of trade missions focused on regional strengths.
|Support for innovation
|| A number of measures to support innovation were announced including £60 million for the new Energy Research Accelerator and £100 million for driverless car technology
|| The Budget had a number of announcements to build on regional strengths, with investments announced to spur research and innovation. A comprehensive transport strategy for the north will also shortly be published.
It’s not about the price tag
Not everything that made it into the famous red book comes with a price tag. Some other improvements to the tax system were also mooted.
Following a consultation on improving access to R&D tax credits for smaller companies, the government will introduce voluntary advanced assurances lasting 3 years for smaller businesses making a first claim from autumn 2015 and reduce the time taken to process a claim from 2016. The government will produce new standalone guidance aimed specifically at smaller companies, backed by a 2-year publicity strategy to raise awareness of R&D tax credits.
And in line with our decade long calls for reforms to the Capital allowances regime, the Chancellor acknowledged that when temporary changes to the AIA expire at the end of this year it’ll need to be replaced with something a lot better than a £25,000 investment allowance.
Early this week we also had news of an Apprenticeship Voucher, to put employers in control of funding for apprenticeships so they can buy the training provision they need. The new mechanism will be developed and tested with employers and providers immediately and fully implemented from 2017.
A review of Business rates was also announced this week.
So stacked up against our wishlist, the coalition have continued to pull on the levers available to them to support investment, exports and better balanced growth. Three cheers from us.