Growth Chase

This was a Budget aimed on getting growth going. Two areas were in focus. The first, investment, is a long-standing UK problem. Today’s announcement to allow companies to offset all capital spending against their tax bill is the latest effort to spark it into life. The second, bolstering the size of the workforce, is a relatively new problem to have emerged in recent years. Here there are changes to childcare provision and pensions. But at least both measures are being launched amidst a better growth environment after an upgrade to the outlook from the OBR.

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Getting back to work

In today’s Budget speech, the Chancellor ate up a lot of time announcing give-aways that are relatively small beer – in some cases, literally. We heard about funding being made available to fix potholes in England; relatively small amounts of money for leisure centres, veterans and Ukrainians; a freeze on duty for draught beer; and even investment in Tipton town centre. Jeremy Hunt spoke for over an hour, but the significant announcements in the speech could have been condensed into much less time.

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Kwarteng throws a fiscal Hail Mary

This was a ‘kitchen sink’ Budget according to the BBC’s Faisal Islam, with the Chancellor throwing almost everything into it, including a wide range of tax cuts and incentives. A mini-Budget it wasn’t. But there was little to explain how it would all be funded. The shadow Chancellor Rachel Reeves perhaps explained it best when she said that “never before has Government borrowed so much and explained so little”.

Image Source: BBC News

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Chief Economist’s Weekly Briefing – Jab before the storm

Boris Johnson fired the starting pistol for a major jab fest over the next three weeks in what could be dubbed the jab before the storm. It comes at a time when the UK’s recovery appears to have stalled in October as firms struggled with supply chain problems and staff shortages even pre-Omicron. Reintroduction of restrictions to curb spread of Omicron, will hit travel and hospitality sectors the hardest again. October’s slowdown will further complicate monetary policy dilemma, and the prospects of a delaying a rate hike this week are strengthening.

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Sunak: the Big Extender and Big Freezer

Today’s Budget was largely as expected. Much of the content had been flagged beforehand, and then there were the big manifesto pledges that were off limits. But that’s not to say it wasn’t a significant Budget, and it may indeed be the last, or penultimate, big spending Budget. Rishi Sunak today announced £37.5billion of spending in the current financial year and the next. Apart from last year’s Budget, it is, by any historical comparisons outside of the pandemic, a huge amount of spending. What’s concerning though is that spending in future years is going to be cut at progressively larger amounts, and next April will therefore herald the start of four consecutive years of public spending cuts. On the tax front, there were further cuts or extensions of existing tax cuts in some areas but also tax rises in others.

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Come back in the autumn

Rishi Sunak may only have been Chancellor for five months but he is already a crisis veteran. Having already splashed out hundreds of billions of pounds worth of support – £281.5bn since 11 March 2020 – today’s package added a further £30bn. Phase 1 of the Chancellor’s response was about protection via blanket support for the economy. Significantly Phase 2 of the economic response, today’s package, is more targeted support and focussed on jobs. The third phase is rebuilding. 

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Budget 2020: The right prescription for now?

Today’s Budget announcement was part of a stimulus ‘double-bill’. The Bank of England unveiled a massive impetus this morning, with a 50-basis point cut in the interest rate and more importantly a package of targeted measures to guarantee credit flow to businesses given the looming threat of Coronavirus.

This afternoon’s instalment in the form of Rishi Sunak’s debut Budget complemented this by acting to ease cash flow concerns for households and businesses. In addition, the public spending taps have been turned on to support public services and to enable investment in infrastructure – in relation to everything from climate change to transport and housing. One thing that was missing however was any meaningful increase in taxes. Normal Budgets are generally a careful balancing act of revenue-raising and spending commitments, but not today, which was a rather one-sided affair in that it was overwhelming focused on spending.

Where is all of this money coming from if not from tax rises? The answer is borrowing. The UK is set to borrow £300billion over the next five years.

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