Various Comments On The UK Budget
4th March 2021
A few comments from various sources today.
Budget response: No mention of productivity
Chancellor Rishi Sunak today unveiled his budget, designed to help the economy recover from the effects of covid-19. But finance and economy expert Zeeshan Syed, from the University of Salford Business School, says there was a glaring omission, with no mention of productivity.
Zeeshan said: "This budget needed to be the most impactful since WWII because it had to lay out the plan for restarting growth and competing with the EU, a new competitor. Rishi tries to address both challenges by announcing policies such as more funding for existing businesses, ease of access to grants, the extension of the furlough scheme, incentives to recruit more people, and investment in Fintech.
“These interventions are needed, but two things that matter most seem to be under-addressed. One is that it does not provide a way forward for long-term stability, and second, it does not admit enough that we are the second-lowest nation in terms of productivity among G7.
“For the first, the Chancellor postponed the corporate tax raise to 2023, and it will delay firms' relocation and protect jobs. But come 2023, firms may consider relocating to Ireland or elsewhere again, where companies can have the best of all worlds. Further, if we want savers and consumers to spend their money, then we need to give them the confidence about their jobs now, not in 2023.
“The latter requires incentivising adults to retrain, relearn, and redevelop their skills. The Chancellor wishes to handle this with another scheme, but his first Kickstart scheme could not do the job. A better solution could be to entrust universities to train our young and adults and lead the nation out of the low productivity crisis.
“Let’s hope he has another plan."
University of Salford expert comment
Budget response: Saving the High street and net zero ambitions
Chancellor Rishi Sunak today unveiled his budget, designed to help the economy recover from the effects of covid-19. Among the measures announced were pots of money to help support community ownership of social venues.
Experts from the University of Salford Business School respond with their take on what was announced;
Dr Gordon Fletcher, retail expert, said: "The Chancellor's budget offered a predictable and even inevitable response to the cost of the pandemic. However, within the details some surprising initiatives emerged. The Community Ownership Fund offers the prospect of local groups 'buying the pub' or sport clubs. This opportunity picks up the growing sense of the local that has emerged during the past year and may provide a lifeline to some of the social venues that have suffered the most. Of course enabling community ownership of these venues may also represent the failure of a previously successful business.
“The £4.8bn Levelling Up fund is the other opportunity on the table for high streets. The focus is on big infrastructure projects such as buying brownfield as well as supporting cultural institutions including local museums. The challenge will be to get proposed projects lined up with the economic need in each locality. As is often the case with budget announcements, the prospect of success for these funding initiatives and these projects will come down to the details. Not least the choice of which project each MP will decide to support."
Dr Jonathan Owens, logistics and infrastructure expert, said: “It is encouraging that the budget provided further direction on net zero emissions to try to maintain pace with the 2030 deadline for the cessation of traditional fuel vehicle sales and moving to the sales of electric and hybrid vehicles only after this date.
“This was provided by the Treasury reforming the Bank of England's mandate to include targeting net zero emissions, this was on top of the existing 2% inflation target. While green announcements are an expectation in budgets, because of the current pandemic today’s announcement is relatively modest.
“Despite the Transport Secretary recently suggesting the UK’s charging infrastructure is “World Leading” the rollout of electric vehicle charging points has fallen behind what is needed for the 2030 as claimed by a recent Policy Exchange think-tank. The UK will need 400,000 public chargers by 2030, up from 35,000 currently to reduce the risk of “charging blackspots.” Therefore, this was perhaps an opportunity missed for a post-COVID-19 green infrastructure revolution to support the UK’s road to net zero.”
Responding to the Chancellor's Budget speech, Musab Hemsi, Partner at specialist HR and employment lawyers LexLeyton said: "This package had to transform a blurry picture of the public finances into a clear, sensible and practical outlook for financial support as the recovery from Covid-19 begins in earnest. While the Chancellor may not have provided complete clarity for the next year, business leaders will welcome the package announced today. It goes some way to shed light on the outlook for businesses that are sustainable in the long run.
"The extension of the furlough scheme is one of the standout elements of the Budget and should bridge the gap between the end of the scheme and the return to work of a majority of the population. It was inevitable there would be some form of tapering off as the furlough scheme winds down. Employers remain responsible for National Insurance and pension contributions for hours not worked, resulting in an often significant outlay for businesses across many industries where the Covid measures have not permitted any real recovery yet. Businesses will be hoping to open as soon as possible to start generating revenue that will counteract their increasing overheads and tax commitments as the scheme draws closer to its end.
"Employers will need to prepare for the end of the furlough scheme in good time, particularly bearing in mind the statutory time periods for collective consultation in the event of large-scale redundancies. In the details of the ‘winding down' of the scheme, we hope to see a continuation and extension of the scheme's flexibility. In particular, re-introduction of the scope of furlough to include individuals working their notice would be a significant benefit to employers, with so many workers moving jobs. Flexibility is essential to help businesses plan their own recovery."
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Commenting on the Budget supporting the technology and life sciences sectors, Ian Warwick, Managing Partner at Deepbridge Capital, said: "The Chancellor's announcement that the Government is committed to supporting the technology and life sciences sectors in the UK, is naturally music to our ears. The commitments to attract ‘scientific superstars' to the UK via visa reforms and the intention to unlock pension funds to support innovative companies, are welcomed. In the UK we have great academia, a history of innovation and, importantly, a great funding eco-system but there is always room for improvement and the consultation to better understand how pension funds can be accessed to support this eco-system will complement the great work already underway via the Enterprise Investment Scheme."
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a sigh of relief for business owners, but current regime's days are numbered
On what today's Budget means for businesses, Mark Heppell, Partner at JMW Solicitors, says: "The freeze on Capital Gains Tax (CGT), and no mention of business disposal relief (Entrepreneurs' Relief), is good news and business owners will breathe a sigh of relief (for now). The speculation surrounding CGT reforms was quite heavy leading up to the budget, and given the reviews that have been carried out in the last year, I would not be surprised to see changes in the near future so the message to business owners planning their exit will still be to bring forward their plans as it does feel like the days are number for the current regime.
"I'm also not surprised by the increase in Corporation Tax (from 2023) and it makes sense to me that the most profitable businesses will be called upon to contribute in a greater proportion. Hopefully the freezing of the rate below £50k profit and tapering to £250k profit will give some comfort to SMEs, but it will mean that, for most, there is more to pay."
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Rishi Sunak is planning a whole new wave of unemployment starting on 1 July Richard Murphy
Rishi Sunak is to extend furlough. That's already been announced as part of the budget. It is now likely to last until September. There are two things to say.
First, in that case, do not believe that the government thinks Covid 19 will all be over by June. I note this tweet this morning from the Health Services Journal:
NEW: NHS in London asked to plan for ‘possible covid surge later in 2021' https://t.co/p9raMBamj2
— Alastair McLellan (@HSJEditor) March 3, 2021
I have been told that 'later in 2021' might mean July. Given what is planned, which is guaranteed to increase R in a largely unvaccinated, or at best half-vaccinated population, that seems entirely plausible to me. I think it likely that furlough is going to be needed along with many other measures.
Second, Politico explains the new plan like this in their morning email briefing (which is worth subscribing to):
Between now and June 30, the government will continue to pay 80 percent of wages for furloughed workers up to £2,500 a month. From July 1, the state support will taper off, with the government then paying 70 percent of wages up to a cap of £2,187.50, and employers covering the rest. From August 1, the government will pay 60 percent of wages up to £1,875, with employers having to pick up the remaining 40 percent.
So, just as people can't return to work, and just as their employers feel increasing stress because they cannot reopen as they would wish, the government is calling on those most hard-pressed of employer's to pay more of their employee's wages which, of course, they will not be able to afford to do because if they could they would have those people at work.
To put it another way, this is a car-crash for unemployment in the making. A massive jump in those out of work is coming unless this is changed before July.
I think a lot will change before July. I may be wrong. I hope I am. I fear I am not.
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