IoD Week in Policy 25th–29th October
The Autumn Budget: funny money
As with any British sporting event, the build-up to the Autumn Budget was filled with anticipation, expectations, bets, and teasers of the line-up. Here at the IoD, we were ready with our scorecards, huddled excitedly around the television, ready for the action, having bought our Pret sandwiches in preparation.
The atmosphere in the arena was, just like any British stadium, tense with boos and cheers, spectators sitting shoulder to shoulder on their royal mint green benches, and close ups of the crowd. The game lasted 1 hour 40 minutes taking into account extra time for water breaks and page turning. And, in the end we were disappointed with the result. How predictable.
The minute he walked in the joint, we could see he was a man of distinction, a real big spender. Rishi began by setting the scene: “Employment is up. Investment is growing. Public services are improving. The public finances are stabilising. And wages are rising.” He wasted no time in throwing in ‘levelling up’, and the high-wage, high skilled, high productivity, high five economy, before unpicking the inflation and labour market situation. If we had a penny for every time levelling up was mentioned…
Inflation in September was 3.1%, and likely to rise to 4% in the next year according to the Office for Budget Responsibility (OBR). The two costly culprits for this are post-pandemic rising demands, and the continuing energy crisis.
Rishi promised to control inflation, providing a £500 million household support fund to help with the cost of living; temporary visas for HGV drivers; suspending the HGV levy, and, to top it off, improving lorry park facilities. Maybe when he said ‘control inflation’, he really meant providing extra tyre pumps?
The next item up for bid was growth. OBR forecasts show that the economy will return to pre-pandemic levels by the end of 2022. Growth this year is revised up from 4% to 6.5%. They then expect the economy to grow by 6% in 2022, and 2.1%, 1.3% and 1.6% over the next three years. He reminded us that in July last year, unemployment was expected to rise to 12%, but actually, the new expectation is that it will peak at 5.2%. This should be a good thing, although all we’re hearing is that they keep getting it wrong… Something here seems a bit fishy, Rishi.
Then he really started to splash the cash. It must be funny, in a rich man’s world. A few billion here, a couple of hundred-millions there, almost like it was monopoly money. He upped National Living Wage by 6.6% to £9.50 – there’s a bit extra for passing Go. He promised £11.5 billion to build affordable homes, which is all very well until you get robbed by street repairs. £1.7 billion is going towards the levelling up fund, which means our classic Pall Mall, Trafalgar Square, Oxford Street, and Marylebone Station will change into Aberdeen, Lewes, Stoke-On-Trent, Doncaster, and Bury. Or Burnley, Rishi is quite confused between the two.
He delightfully told the House the Conservative Party is so committed to Levelling up they are even levelling up the opposition. His Twitter feed that afternoon was busy with bright red levelling up comms in which he tagged all the Labour MPs. Apparently he was riled up on post-match competition.
But unfortunately, whatever your local branches tell you, money doesn’t grow on trees, and so taxes are the highest they have been since the 1950s. The National Insurance rise was brushed under the rug in the submission, but there were some welcome cuts:
- Universal credit taper rate will go down by 8% – we’ll give them credit for that one.
- 50% business rates discount for retail, hospitality, and leisure sectors – no small change.
- Tax relief for museums and galleries – a nice way to canvas support for the arts.
- R&D tax reliefs to ensure innovation and jobs remain in the UK – a wealth of opportunity there.
- The tonnage tax will reward companies for adopting the UK’s merchant shipping flag, the Red Ensign – money for nothing and your ships for free. It seems Britannia will waive the rules.
And whoever said money can’t buy happiness took their tea break at the alcohol duties section. The new system introduced will work like this: the stronger the drink, the higher the rate. Apart from certain spirits, which won’t experience cuts in order to help the hospitality sector recover, strong drinks will see slight taxes rises, but lower alcohol drinks will see cuts. Rishi hopes this will end our culture of ‘problem drinking’. Although, once you have a drinking problem, the price tends to become irrelevant. So, bring on cheaper craft beer, sparkling wine, and Scotch Whisky. That’s the spirit!
Our two cents of the statement is that we think they’ve been a bit conservative. There were some reliefs, but where the opposite occurred we are worried businesses won’t be encouraged to push ahead with their plans for growth. Their so called ‘skills revolution’ should really have been coined a ‘skills mild shakeup’, with no solid future strategy on labour shortages. There was barely a glance to sustainability, despite COP26 being just around the corner. Bit of a cop out if you ask me. The air passenger duty that will mean those who fly further will pay more will make hardly a dent. We’re not banking on that making too much difference. Finally, we felt they had the opportunity to reverse previous decisions on employment and profit tax. But, they won’t budge-it seems.
The week ahead:
Next week is the start of November, where did October go? And if the budget wasn’t scary enough, we still have Halloween to come. Talk about trick or treat!
But also starting next week, the long awaited event, followed by many, participated in by big global players: the Autumn Internationals. The tournament will see old friends and old rivals go head to head throughout. We’re thankful it’s a northern v southern hemisphere event. It’s not particularly good timing to be letting France and England lock heads in scrums…
We also have COP26 to look forward to, hosted in Glasgow. It will be starting on Sunday, and will last until 12th November. Its aim is to unite the world in tackling climate change, advancing the promises set out in the Paris Agreement, and accelerating a green recovery from coronavirus. World leaders, business leaders, negotiators, and government representatives will travel to Scotland for the event. There has been much backlash about the fact that hundreds of people will be flying in at the same time, which is not so good for the environment. But, luckily, our Director General Jon Geldart, who will be attending, can just hop on the train. Much more sustainable.
On Tuesday, Jon will be attending a High Level Reception, co-hosted by senior UK ministers and His Royal Highness, the Prince of Wales.
Monday 1st November
- Treasury committee oral evidence on the budget
Tuesday 2nd November
- Topical questions to the Chancellor of the Exchequer, Rishi Sunak
- Debate in the House of Commons on the Subsidy Control Bill
- Our Chief Economist Kitty Ussher will be speaking at a conference titled ‘The long road to recovery: a considered response to the Autumn Budget’. https://www.quantuma.com/events/long-road-recovery-considered-response-autumn-budget
Wednesday 3rd November
- International Trade Committee oral evidence on the UK-EU trading relationship.
Thursday 4th November
- The Bank of England Monetary Policy Committee will meet to consider whether to raise interest rates.