The Autumn Budget gave businesses much-cherished stability, but they will need something more next Spring – Brexit deal or not, says Mark Essex.
Even the Chancellor himself admitted he had very few rabbits in his hat for this year’s Budget. Monday’s speech was long on (attempted) jokes and short on radical changes. And perhaps business should be grateful for that. There will always be areas where businesses wish announcements had gone further (like relief on business rates for bricks-and-mortar retailers) or held back a little (like the inflation-busting rise in the minimum wage). But sometimes less is more.
And on Monday the ‘less’ was Brexit. Given that our exit from the European Union is arguably the defining economic issue of our time, given that theory becomes reality in 147 days, and given that the Budget is meant to set out the government’s economic agenda for the following 365, it was quite a feat by the Chancellor to limit himself to just one mention of Brexit in the 71 minute speech.
I’m not complaining. Businesses are wrestling with difficult decisions about how, when and whether to invest time, money and resources into Brexit contingency plans. What they don’t need right now is to be distracted by tweaks to the tax code, new levies, applications to funding schemes or a general rewiring of regulations.
Instead of adding to the already-brimming stock of uncertainty, the Chancellor offered business – where he could – some visibility of changes to come, and a voice in those changes too. For example, the Treasury will consult on a new digital tax before it introduces the charge.
Monday’s Budget was a placeholder and a better one for it. However, there is only so long that a country’s economic policy – or the economy itself – can remain in a holding pattern.
Phillip Hammond was correct in reserving his right to turn next year’s Spring Statement into another full-blown Budget if, in his words, “the economic or fiscal outlook changes materially in-year”. In other words, a ‘no-deal Budget’.
However, this is where I would like to see the Chancellor go further. Be bolder. I would like to see him present a Spring Budget, even if there is a deal. This is the point in time when (possibly just a few weeks’ earlier) businesses will be breathing a massive sigh of relief at looking over, but not falling over, a rather high cliff. In the euphoria of survival and a modicum more certainty, we should see pent up investment start to flow (though not cascade given that the UK’s future relationship with the EU – and therefore its economic model will remain undefined).
This is precisely the point at which we need to see a clear articulation of how the UK will create wealth sustainably over the next decade and more. We must find a way to improve the UK’s woeful productivity rate, maintain enviable current levels of FDI and spread the fruits of that growth evenly across the UK. The window of opportunity will be small – that pent up investment won’t last long and the feel-good factor could be short-lived as we ponder the challenge ahead. That’s why a second Budget is needed not only to provide a fiscal stimulus but also momentum behind vital initiatives like the Industrial Strategy.
We need much more than a placeholder come March. After the doom, gloom and division of the last three years, I would like to see a Spring Budget for Growth.