The Chancellor has now delivered his first Budget, albeit not the one originally envisioned and against a challenging backdrop of a growing Coronavirus crisis. The Budget had to be rewritten in parts to help fight it, and included significant measures amounting to £30bn to support the public health response, businesses and the wider economy to prevent meltdown. With various balls to juggle, the Chancellor took the challenge of Coronavirus head on, and was keen to show he understands people’s concerns and frame this above party politics, devoting almost 20 minutes of his hour-long speech to the subject.
From the Government’s perspective, this Budget was also significant because it was the first Budget following the General Election 2019 where the Conservative Party returned an 80-seat majority, which the Prime Minister sees as an emphatic personal mandate. It was also the first Budget since the UK has left the EU (and has now entered the Transition Period) and the first Budget for Chancellor Rishi Sunak himself who is only four weeks into the job, since former Chancellor Sajid Javid resigned rather than sack all of his Special Advisers.
A Budget of two halves, then came the Budget that had been prepared earlier – a new mantra appeared and this was a Budget (and a Government) about getting things done.
The Chancellor was very keen to refer back to Manifesto pledges, and use the Budget to at least in part deliver the change that people voted for at the General Election 2019.
There was a lot of spending on infrastructure – a total of £640 billion of capital investment will be invested in roads, railways, communications, schools, hospitals and power networks – and a lot of focus on the entire country benefitting from this.
Another area to get a lot of Government attention was ideas, science and innovation – a key priority for the Government coming from the very top and this is about investing now and over the long term. With No10 planning for “a decade in power” at least, this long-term thinking to deliver a high-tech, future-facing economy is key to this approach. Tellingly, the Chancellor said we need more risk taking and creativity in this country not less.
Moving away from the approach of previous Conservative administrations of the last decade and firmly parking their tanks on Labour’s lawn, there was a lot of spend spend spend today. But even with the relaxation of constraints on borrowing for capital or infrastructure spending, there may be some tax rises or revenue generating measures in the detail behind the Budget. The devil is in the detail and tends to come out in the hours and days after the Budget is delivered.
It was interesting to see that despite all the speculation ahead of the Budget as to whether the Government would relax its own fiscal rules, the Chancellor spoke about acting responsibly with the nation’s finances and set the Budget within existing fiscal rules which will please the traditional Conservative voter base. In his words credibility comes from what we do not what we say. Of course, the Coronavirus measures are outside of this and the Chancellor did say that there would be a review of the fiscal framework which will report back in the Autumn.
All in all, an assured performance from the new Chancellor, he and No10 will be pleased. A lot of measures will be popular with Conservative backbenchers and some would argue that with a majority of 80, it’s easier to take difficult decisions. A glaring omission seemed to be a long-term, sustainable solution to social care, widely acknowledged as one of the key challenges facing the Government and the country. Beyond confirmation of additional funding to stabilise the system, longer-term answers will have to wait as the Government seeks cross-party consensus.
Levelling-up and talking about the whole country was a key theme of Rishi Sunak’s speech today and connected many of the planned spending pledges and Conservative Party Manifesto commitments from further education to housing.
The Treasury has committed to engage with all regions and nations of the UK to ensure that the Comprehensive Spending Review in July delivers for them. Significantly, Sunak made clear that he wants to “change the mindset of Government” by reviewing the Treasury’s Green Book to ensure that “economic decision-making reflects economic geography”. This really shows the commitment to turbo charge the levelling up agenda that this Government is seeking to bring about.
The announcements today were not just new funding for transport and infrastructure but also symbolic measures such as a pledge to relocate a minimum of 22,000 civil service jobs out of central London and establish a new economic decision-making policy campus in the north of England – made up of four different Government Departments.
Elsewhere, the Government has agreed a devolution deal with West Yorkshire to establish a Mayoral Combined Authority with a directly elected Mayor from May 2021. Sunak committed to investment of £4.2bn for transport networks of eight city regions across England through five-year “London-style” transport settlements agreed with central Government and based on plans put forward by the Metro Mayors.
On transport, Sunak surprised the motoring sector by freezing fuel duty (anticipated to have been raised) and announcing over £27bn worth of investment to improve the road network, major roads such as the A303 are expected to see a boost in their investment levels, while the £2.5bn pothole fund will please many local communities and Councils.
Railways will see investment through major projects like HS2 and Northern Powerhouse rail, alongside other announcements today to develop the Midlands Rail Hub, a new station at Cambridge South and investment to increase accessibility at train stations across the country.
Digital connectivity was given a boost through £5bn for gigabit cable broadband for the hardest to reach areas and £510m to improve 4G coverage in rural communities.
Although transport and infrastructure were key elements of this Budget, the delay of the National Infrastructure Strategy until the Spring will leave some disappointed as this was to set out the Government’s approach to major investment in the north and midlands, as well as setting out in detail how the Government will meet the net zero target.
The words will be warmly welcomed but the key thing now is will levelling up translate into increased economic prosperity and productivity or will it fall by the wayside like the Big Society of David Cameron or the Burning Injustices agenda of Theresa May.
Health & Social Care analysis
“Whatever extra resources our NHS needs to cope with COVID-19 – it will get. Whatever it needs, whatever it costs, we stand behind our NHS,” announced Rishi Sunak in his first Budget as Chancellor.
In the face of a global challenge, a robust domestic response is necessary and the NHS, the beating heart of the nation, is at the forefront of the response and clearly of the Government’s Budget.
As the Government prepares for an ‘all hands-on deck’ approach to support the coronavirus outbreak in the UK, Sunak announced an NHS emergency response fund, which has been set at £5 billion, with a commitment to increase the sum if necessary.
To further evidence the Government’s commitment, the Chancellor announced £6 billion to strengthen the NHS in England, with this money to be used to hire 50,000 nurses and build 40 hospitals.
But critics are asking yet again: what about social care?
The Government reiterated its commitment to invest £1 billion of additional funding for social care next year, as announced in the Spending Round 2019. However, experts say this is not enough – particularly in the face of COVID-19: the NHS is receiving additional financial support to deal with the outbreak, so why isn’t social care? This is especially concerning given that social care, much like the NHS, cares for society’s most vulnerable, including the elderly and those with underlying health conditions.
The Budget also references the Government’s commitment to long-term reform of adult social care and highlights that the Health Secretary wrote to colleagues asking for ideas on reform – but a mere 90 days after the election and 5 days before the Budget, suggesting again that social care is an afterthought.
Overall, the Government’s message to the electorate is clear: they are doing everything they can to ensure that the NHS is supported over the next weeks and months.
But its message to social care providers is clearer: whatever extra resources social care needs to cope with COVID-19, let alone the wider crisis, it’s not our priority. Whatever it needs, whatever it costs, we’ll deal with it later.
The Chancellor noted in his speech that the Government’s “greatest responsibility is the education of our people”, highlighting how “a world-class education will help the next generation to thrive”. Providing this world-class education at all levels with the world-class facilities to match, was the central theme of all the education announcements outlined in the Budget.
Many of the measures outlined in terms of school funding and teacher salaries were not new, having previously been announced in January and at the 2019 Spending Review. These included setting the minimum per pupil funding levels and announcing additional funding to support children and young people with SEND. The investment was designed “to give schools the biggest funding boost in a decade”, delivering on the Government’s manifesto pledge.
Announcements on additional funding for PE and sports in primary schools, set to increase to £29 million a year by 2023-24, along with the £90 million a year to introduce an Arts Premium from September 2021, underline the Government’s efforts to revitalise areas of the curriculum and extracurricular/enrichment activities that have come under pressure and faced the most significant cuts over recent years to help schools make ends meet.
Abolishing the so-called “reading tax” by applying a zero rate of VAT to e-publications was a particularly interesting measure, demonstrating the Government’s commitment to removing barriers and ensuring that everyone has equal opportunities and the tools to succeed, regardless of their background. The Chancellor highlighted that reading was a basic, fundamental part of education and something that should be available to all.
The focus on delivering the Conservative Government’s manifesto commitments was widely evident in today’s Budget. The announcement on enabling parents of school-aged children to use tax free childcare towards the cost of wraparound childcare, ticked off their pledge to help working parents of over 5’s access childcare.
Building on the previously announced increased investment in Further Education and the Government’s efforts to ensure that the sector is recognised for the important role it plays in “equipping young people” with the skills they need to succeed, the focus of the Budget was on capital investment. This is designed to ensure that FE colleges are fit for purpose and have the world-class facilities and equipment to deliver high-quality education and training. They no doubt see this as important to facilitate the long-term successful roll out of the Conservative’s flagship T-Levels, due to be introduced from this September. This was demonstrated further by the commitment to provide £95 million for providers in England to invest in high quality facilities and industry-standard equipment targeted at supporting T level routes being delivered from Autumn 2021, including construction, digital, and health and science.
The new £2.5 billion National Skills Fund is also significant. It is designed to improve adult skills and ensure that the UK has the skilled workforce to support the needs of businesses now and in the future – and the Government will now consult on how this should be used. They have highlighted that they want to hear directly from people and employers across England “to understand what works in the current system and what does not, and to ensure that the fund is focused on helping people gain the skills they need for rewarding, well-paid jobs”. This is important as it demonstrates a shift in focus to upskilling the workforce and helping people to progress and fulfil their potential, not just gaining the basic skills they need to find employment.
Whilst higher education was not given huge presence in the Budget, there was a clear focus on providing research funding and investing in infrastructure and equipment. This is no doubt designed to plug the well-publicised gaps likely to be left in the wake of the UK’s departure from the EU, maintain the UK’s world leading status and ability to attract and retain the brightest and best talent.
Energy & Environment Analysis: Road to COP still bumpy – but the big announcements are yet to come
Aside from trade negotiations and – now – coronavirus – COP26 in Glasgow and the preceding ‘year of climate action’ represent one of the Government’s major declared focuses for 2020.
Given that, it may seem surprising that the Chancellor has today prioritised £27bn of investment in roads – and a freeze yet again on fuel duty – which dwarves the announcements made on the environment. Allied to the acrimonious departure of Claire Perry O’Neill from her role as Conference President, today’s Budget will have done little to assure green businesses and campaigners that the Government is in the driving seat and ready to show the visionary leadership needed to steer the world towards a deal in November.
However – this is only part of the story. Firstly, it would be remiss to overlook some significant announcements made today. Multi-million-pound spending pots have been promised for clean energy, a Natural Climate Fund and Carbon Capture and Storage (CCS). These fit not only with the Government’s environmental ambitions but also the levelling up agenda and commitment to research and development.
There was also the confirmation of a new tax on plastics with less than 30% recycled content, which should increase recycling rates by stimulating the market for secondary materials, helping create the conditions for a more circular economy.
The commitment to E/V infrastructure, and reduced taxes for purchasing these cars, may also be seen to offset some of the damage associated with the record investment in roads. Yet the freeze on fuel duty must be viewed aside rising consumer costs for public transport, and, given the massive growth in gas-guzzling SUVs, it is hard to see today’s announcement as anything other than political expediency rather than true environmental leadership.
However, several major set piece moments remain this year. These include an Energy White Paper and National Infrastructure Strategy, both of which are expected shortly. Then, in the autumn, the Spending Review and – crucially – Treasury’s Net Zero Review will both come in the weeks leading up to COP. It is these documents rather than today’s Budget which will provide the real litmus test of the Government’s commitment to climate action and the green economy.
Built Environment/Housing analysis
Rishi Sunak today announced a series of measures, which on closer inspection of the Budget documents, appear to amount to a £10.9bn increase in housing investments to support the commitments to build at least 1 million new homes by the end of this Parliament. Regional investment and ‘levelling up’ were the key themes to today’s Budget for the Built Environment.
A significant portion of the spending announced today has been a further £9.5bn in the affordable homes programme, bringing the total in 2022 to £12.2bn. Although social housing was largely ignored in this Budget, with a reduction of one percent on interest rates for local authority borrowing being the only announcement addressing this. With the Social Housing White Paper still yet to be published, this is a move which is likely to draw criticism from the opposition.
As indicated in the Conservative election manifesto, the Government has introduced a two percent stamp duty surcharge on non-domestic residents. This is down from the initial three percent proposed. As a policy largely unlikely to have impact outside of London, this was reflective of the wider levelling up agenda at play. Again outside of London, the Government has committed to examine and develop the case for up to four new development corporations in the OxCam Arc, with a particular focus away from the Oxfordshire part likely due to the ongoing difficulties with the South Oxfordshire local plan.
Responding to ongoing – and high profile – concerns regarding buildings with combustible cladding in the post-Grenfell era, Sunak announced additional public funding to remove unsafe materials from high rise residential building. A Building Safety Fund worth £1bn will be set up, which goes beyond dealing just with ACM to ensure all unsafe combustible cladding is removed from all buildings. The detail on precisely what this covers and how the fund can be accessed is to be announced.
Budget speculation has suggested that we would find out more about potential sweeping changes to the planning system, but these will be pushed to tomorrow to be announced by Robert Jenrick in the House. Whether this is the long-awaited Planning White Paper, or simply a flavour of it, is yet to be seen but with Jack Airey’s move to Number 10 all bets are off for what this could mean for the planning system.
Midlands Analysis – the Andy Street Budget
With a Conservative Mayor, the West Midlands should expect to do well out of a Conservative Budget and it was certainly a ‘win’ for Andy Street. Street, whose re-election campaign is crystallising around transport and a brownfield-first development policy, could scarcely have written a better Budget himself.
Aside from major national spending pledges – such as Business Rates Relief, support for homelessness, investment in skills, investment in roads and funding for the NHS – the West Midlands is set to directly benefit from two principle policies. Which, conveniently, are aligned directly with Andy Street’s re-election campaign.
- £4.2bn to be allocated across eight Combined Authorities for local transport projects: Metro Mayors will be required to put forward specific proposals which the Government will consider funding as part of the package. In the West Midlands, this is likely to support Street’s 20-year metro and rail plan – a bold, integrated transport plan. We would expect Andy Street to be first in line for the new funding.
- £400m Brownfield Housing Fund: A £400m fund has been launched to deliver more homes, more quickly on brownfield sites. The Government will shortly invite bids for this fund and we would also expect the West Midlands Combined Authority to be first in line. The WMCA and Andy Street were named specifically in both the Budget document and Sunak’s speech as likely beneficiaries of this fund.
Street has been one of the Conservative’s strongest proponent of ‘Brownfield First’ and, although principally an economic policy (part of a wider approach to high street renewal), it is designed to reach Conservative voters in Solihull and the Black Country who oppose new development on green fields.
Interestingly the Green Belt was not mentioned once either in the Budget document or speech. This is likely to be more difficult issue for Andy Street to manage as it may signal a relaxation of the Government’s commitment to Green Belt protection. Street recently announced that no WMCA money would be used to enable Green Belt development.
Details of the Planning White Paper – expected in the Spring – will be announced tomorrow and could include more information on the Government’s Green Belt approach, and how this might also impact the Combined Authorities approach.