A cautious Budget for uncertain times
Today’s Budget was delivered against a backdrop of encouraging economic growth but considerable future uncertainty. Brexit will begin in earnest when Article 50 is triggered sometime in the next few weeks, and Hammond will deliver a second fiscal statement in the Autumn, as the Budget makes a permanent migration to later in the year.
Hammond is, naturally, keen to establish a fiscal war chest for use should the economy hit a bump during coming negotiations, or for possible giveaways should an election be called. So a budget shallow in scope was widely predicted, and the Chancellor didn’t disappoint those expectations.
A 2% increase in the National Insurance rate for the self-employed is likely to grab most headlines, along with reductions in tax free dividends for directors of small, private firms. Other announcements included an extra £2bn in social care funding over the next three years, and £100m in investment for strained Accident and Emergency services. There was also a promise of 110 new free schools and an extra £216m in maintenance funding to existing schools. As expected, the Chancellor announced several transitional measures to help those most affected by April’s increase in business rates. This included a £1,000 discount on their 2017 bill for pubs with a rateable value of less than £100,000.
For the technology sector, there were several spending commitments, but little that is likely to set the tech pulse racing. £270m will be invested in disruptive technology such as robotics and driverless cars and a new 5G Hub will receive £16m. A £200m fund will be used to accelerate delivery of full-fibre broadband networks. There will be some tinkering with tax credits for R&D, as well as efforts to improve awareness of their availability.
Entrepreneurs have been quick to criticise the National Insurance changes for the self-employed. Lucy-Rose Walker, the chief executive of Entrepreneurial Spark, said that the rise would “penalise those who are taking risks and starting a business.” A row is already developing over whether those changes in fact break a Conservative manifesto pledge from the last election.
Rashid Ajami, founder and CEO of Campus Society, welcomed the Government’s “ambitions to keep the UK at the forefront of the digital revolution,” but stressed that “those that will help this happen also need encouragement and reassurance – this message on reducing entrepreneurs’ tax-free dividend is a confusing one.”
Professor Noel Sharkey, of Sheffield University, described investment in disruptive technology as “chicken feed by comparison” to that made in the US ($4bn over ten years). Others praised the effort to lead the way on robotics and AI. Dr Sabine Hauert from the University of Bristol said that “investment from government will be key in helping the UK stay at the forefront of this field.”
Once the initial debate dies down, this Budget is unlikely to be one that lives long in the memory. But with potential further political and economic bumps ahead, a safety-first approach is probably exactly what Ministers wanted.
Jamie from our Corporate Business Communications team