The Autumn Budget: Sticking Plasters and Short Term commitments
Given that we are just over half-way through the current government spending cycle and with a ‘Brexit Deal or No Deal and – whisper it quietly – perhaps even a General Election, looming on the horizon it is no surprise that yesterday’s budget (October 29 2018) was largely one of sticking plasters and short-term commitments. Additional support for our NHS and mending the potholes in our roads – things that politicians hope will play well with the public and win them support.
By now you will know that the government is planning to spend an extra £400 million to support schools and an additional £420million to mend the roads but what’s in the small print of HM Treasury’s big red budget book that we might have missed?
- It’s good to know that the 106 page HM Treasury 2018 red budget book is “printed on paper containing 75% recycled fibre content minimum.” And of course, the budget statement heralded a commitment to consult on a new tax on plastic packaging. The current target here is for there to be a minimum of 30% recycled content in future plastic packaging. Now the 75% recycled paper in the budget book looks like a real achievement doesn’t it … and perhaps that plastic tax looks more like a gesture than a real driver for change?
- Neither the environment nor energy made the budget headlines. To be fair, this has much to do with where this budget sits within the Comprehensive Spending Review life-cycle. Big decisions about future strategies and spending will be worked through over the next twelve months. However, the Chancellor’s announcement of the Industrial Energy Transformation Fund and accompanying £315 million of investment will provide important support to businesses with high energy use to transition to a low carbon future and to cut their bills through increased energy efficiency.
- The Chancellor has also confirmed that, should the UK depart from the EU Emissions Trading System (ETS), the government will introduce a Carbon Emissions Tax to help meet the UK’s carbon reduction commitments under the Climate Change Act.
- The widely forecast change to the Climate Change Levy on gas usage is detailed in the red book. The gas levy will be raised so that it reaches 60% of the electricity main rate by 2021-22, while the electricity rate will be lowered in 2020-221 and 2021-22.
- But even this careful, mid spending cycle budget has some big ideas. The removal of the cap on Local Authority borrowing is a bold step by government. The budget book shows that it expects this to have a £4.5billion impact on government spending over the next 6 years. This is a significant sum and with the decision-making devolved to local authorities, it may seem like a huge act of trust on the part of HM Treasury. The urgent need to speed up housebuilding may have encouraged the Chancellor to take this step and, as Local Authorities have now got the flexibility they have lobbied for, it is clear in which direction fingers will be pointed if housebuilding isn’t now accelerated. It’s also quite possible that there is a small team of civil servants in the Treasury now working on a consultation paper on how local authority budgets might be accounted for separately within government spending forecasts in future.
- Napoleon might have referred to us once as a nation of shopkeepers but we are no longer a nation of high street shops. The UK has embraced internet shopping and so the government is intending to spend £675 million to support a sustainable transformation of high streets. This will include redevelopment of those areas to include more housing to replace those redundant shops and support for the restoration of historic buildings on our high streets.
The government has confirmed that the spending commitments made within the October budget will be honoured, even in the event of a No Deal Brexit, which would clearly challenge many of the forecasts on which this budget has been based. The same commitment hasn’t been given for how the spending will be paid for. Philip Hammond has something of a reputation as a “lucky Chancellor”. Let’s hope his luck still rides with him.