The Chancellor is set to deliver his autumn budget this week. Accompanying the budget will be a multi-year spending review. However, a lot has changed since Sunak’s last budget back in the Spring, especially on the COVID-19 front. The virus, whilst on the increase as winter draws near, is now endemic in society and no longer seen by many as a pandemic and much of the support the government put in place due to the impact of COVID-19 has been pulled back.
This budget will be about looking forward, about the country’s recovery, and about putting in place more building blocks onto the levelling up plan. There’s also the Net Zero target and Cop26 around the corner as well.
However, there’s a few points to look out for on Wednesday which we will be keeping a close eye on.
1) Insulating from a winter of discontent
Everyone is under no illusion that tough times are ahead. Whilst the Conservative Party Conference just a few weeks ago may have been buoyant and positive about the future, there’s an energy crisis in play, inflation set to rise and the £20 uplift in Universal Credit has been withdrawn.
Indeed, at Conference, Sunak appeared the level-headed but hard-nosed accountant that said, “Whilst I know tax rises are unpopular – some will even say un-Conservative – I’ll tell you what is un-Conservative: unfunded pledges, reckless borrowing and soaring debt…Anyone who tells you that you can borrow more today and tomorrow will simply sort itself out just doesn’t care about the future.”
So, what’s coming down the track to help the public in this looming winter of discontent? There’s going to be the rise in minimum wage to £9.50 an hour for those aged 23 older. There’s the possible extension or uplift being trialled by some of the Warm Home Discount. Then there’s the possible cut in VAT to energy bills of households across the country being reported in the FT recently. To keep local businesses afloat, business rates has been one point that’s dominated budget speculation and Sunak is possibly going to announce the results of the review of business rates; he had been due to set out the findings from this review in March!
Whilst nothing will be confirmed until Wednesday afternoon, it is certain that the Chancellor is going to have to tread carefully on this tightrope of a budget. He’s got tough financial and political choices to make between insulating the public finances from further impact and helping to protect those households walking into higher bills with less money each month to pay them.
2) No10 vs No11
We all know that the PM is keen on a big project or two – bendy buses and garden bridges anyone? Mr Johnson is also going to be keen to show that the country is well on its way on the recovery path from COVID-19. What does this better than a nice, shiny, new project to announce? Investment in transport links across the north perhaps? Well, it’s not going smoothly so far unfortunately, the Integrated Rail Plan is expected to be announced alongside Wednesday’s budget and spending review. However, reports are the Plan is now back with the PM’s Policy Team as what he saw from the Treasury and DfT wasn’t what he wanted. A Whitehall official is reported to have said, “Boris came back from holiday and was not happy with what the Treasury and Department for Transport had come up with, which is an NPR [Northern Powerhouse Rail] network on a shoestring, when this is his flagship Red Wall policy.”
A PM keen on investment, spending and projects with a fiscally-prudent Chancellor sounds like the two should balance out, but this mix can lead to flashpoints. The budget and spending review will give us a glimpse at who’s winning this argument at the moment.
3) Doubling down on levelling up
The start of the month saw the Conservatives talking about levelling up and building back better more than ever at Party Conference. However, what levelling up sorely needs is a concrete and deliverable plan, backed up by funding, that government departments can understand and help to achieve. But so far we’ve seen funds such as the Community Renewal Fund stutter their way along, with funding still to be dished out to successful projects. This fund was meant to be a precursor to the UK Shared Prosperity Fund, a replacement for the EU Structural Fund.
We’re also waiting for Neil O’Brien’s Levelling Up White Paper. Whether this will be announced alongside the budget and spending review or delayed further we’ll only know in two days’ time. However, if this government is serious in delivering a plan to back up the slogan and the pillars of levelling up, we’ll need to see some funding streams announced or pushed forward at this budget. Expect announcements on the Community Renewal Fund and the UK Shared Prosperity Fund.
4) Net Zero, but at what cost?
Cop26 is just around the corner, and we’ve just had the government’s Net Zero Strategy of how they want to decarbonise the country and the Treasury’s Net Zero Review of the costs of transition to zero carbon. The £5,000 grants to convert gas boilers in homes to heat pumps is a start. But with heat pumps coming in anywhere from £6,000 – £18,000, this grant could easily become Green Homes Grant 2.0. In addition, the aforementioned cost of living crisis could see people keep their money in their pocket, especially as the 2035 ‘ban’ on gas boilers is now simply an ‘ambition’. Not to mention that Conservative backbenchers have already made their feelings plainly known when Net Zero targets look like they’re about to hit the pockets of the electorate.
It will be interesting to see how much the government’s ‘green’ agenda hits the headlines of the budget or whether the Strategy and the Review are seen by the government as them greasing the wheels sufficiently to help the private sector do the heavy lifting on the transition to Net Zero. Don’t expect much more from the Chancellor on this point.
For further information and insight on the Autumn Budget, or to discuss any specific Autumn Budget items, please do not hesitate to get in touch with Oli Hazell.
