It’s only been 14 weeks since the autumn statement, but next week the Chancellor will return to Parliament for his first official Budget statement and the first of two Budget statements this year.
Budget 2017 – part I
Today EEF published its submission to HM Treasury ahead of the statement (we actually supplied it to officials five weeks ago, or just nine weeks after the autumn statement!).
The point I’m trying to make is that we’re not expecting anything radically new in this statement – let me show you my workings….
A quick reminder of what happened at the Autumn Statement
A small number of fairly substantial announcements were made back in November. Key among them were the redrawn fiscal rules and a big slug of cash – £23 billion – for a new National Productivity Investment Fund.
This essentially saw the government take a more cautious approach to delivering improvements to the public finances, and a clear targeting of limited resources towards improving productivity through investments in housing, R&D and infrastructure.
What’s been going on in the economy since the Autumn Statement?
Three months ago there was a fairly broad spectrum of views on the health and outlook of the UK economy. The Office for Budget Responsibility joined most forecasters in downgrading its expectations for growth this year, but projections of 1.4% growth were hardly predictions of a looming economic apocalypse. Since then the range of forecasts for 2017 growth has narrowed and the consensus view has become a bit more positive – thanks to the strong end to last year, buoyant survey data and fairly positive economic news from the rest of the world.
In essence, there isn’t anything in the data screaming ‘change course’ on the policy front.
The government have begun consulting on industrial strategy
…And in some respects the course is still being plotted by this government. January saw the publication of the government’s green paper on industrial strategy, with consultation on-going until well after Budget.
Announcements in the Budget should be in line with the priorities outlined in January; this is not an opportunity to add to them.
They’ve been consulting on other things too
Importantly for manufacturers, that’s not all that been under review since the autumn statement – the effectiveness of the tax treatment of R&D, building better digital infrastructure, corporate governance and what should be top of the list for the Industrial Strategy Challenge Fund.
We’ve got recommendations on all of these in our submission to the Treasury.
What about the whole brouhaha over business rates?
We’ve also got recommendations on business rates – but while we think the major issue is the inclusion of integral plant and machinery, others have become increasingly exercised about the impact of the recent revaluations. The companies at the losing end of this process are likely to see something in the way of action in the Budget, but after a long period of consultation on the shape of whole system, I’m not convinced there’s a whole lotta appetite to go back to the drawing board on this one.
So what’s a good outcome?
Three things for us:
- Sticking with the autumn statement priorities of boosting productivity through investment in housing, infrastructure and R&D. This would be a good first steps in engendering a bit of predictability in these events.
- Putting the business rates controversy to bed.
- Taking a big step on making the environment for innovation in the UK even better; further enhancing the R&D tax credit for large and small companies and getting the Industrial strategy challenge fund working to support manufacturers on their 4IR journey.
You can read our full list of recommendations here. And check back on 8th March when we’ll be summing up the key points from the Budget and the OBR forecasts.