The day started with the Bank of England announcing an emergency cut in interest rates from 0.75 per cent to 0.25 per cent in a bid to shore up the economy during the COVID-19 outbreak and complement Treasury announcements.
Following the Conservative’s sweeping victory in December’s General Election, expectations were high for a Budget delivering on the Prime Minister’s ‘levelling up’ agenda.
As has become the norm, events have moved quickly since the election. The new Chancellor, the Rt Hon Rishi Sunak MP, has had just four weeks in the job to prepare for this Budget following the surprise resignation of his predecessor, the Rt Hon Sajid Javid MP. Adding to the pressure, the Chancellor has had to introduce measures to manage the COVID-19 outbreak – the most pressing issue confronting the Government today, but far from the only issue, as the Chancellor said at the despatch box today.
Today’s Budget announcement struck a balance between delivering on the Government’s ‘levelling up’ mandate for new voters in the regions, and immediate policy measures to bolster the UK economy and manage the “significant” temporary impact caused by COVID-19.
There was strikingly little on Brexit, seemingly falling by the wayside as the Government appears intent on investing across the UK.
The Chancellor confirmed the National Infrastructure Strategy would be published later in the spring but, as expected, there was a big fiscal stimulus for infrastructure. More than £600 billion is to be invested in infrastructure projects including roads, railways, and broadband by mid-2025. Roads will receive over £27 billion between 2020 and 2025. The Chancellor committed £5 billion for gigabit-capable broadband for rural areas. The Shared Rural Network agreement has been finalised between the Government and industry, meaning 95 per cent of the UK’s landmass will have 4G mobile coverage by 2025.
Housing and planning
The Budget set out a range of housing measures including £12.2 billion for the Affordable Housing Programme, £1.1 billion for the Housing Infrastructure Fund and £400 million for ‘ambitious’ Mayoral Combined Authorities and local areas to build on brownfield sites. Local authorities will benefit from a one per cent cut on interest rates on lending for social housing.
Recognising cross-party and cross-sector calls for further action, the government will introduce a £1 billion New Building Safety Fund to remove unsafe combustible cladding from public and private housing higher than 18 metres.
For foreign buyers of UK property, the Chancellor announced a 2 per cent stamp duty land tax surcharge to be levied from April 2021, with funds raised to be used to reduce rough sleeping in England.
The Chancellor noted that the Rt Hon Robert Jenrick MP, Secretary of State for Housing, Communities and Local Government will reveal reforms to the planning system tomorrow, followed by a planning white paper in the spring.
To the delight of the Chamber, the Chancellor set out wide-ranging business rate discounts in support of small businesses, including 100 per cent business rates relief for retail, leisure and hospitality businesses with a rateable value of less than £51,000 for the next financial year. There is to be a long-term review into the overall future of business rates, with a report due in autumn.
Environment and climate change
The Chancellor announced a string of measures to tackle climate change. From April 2022, the Climate Change Levy will be raised on gas but frozen on electricity. There will be a Plastic Packaging Tax on manufacturers and importers, also from April 2022. The red diesel scheme will remain in place for the electorally-sensitive sectors of agriculture, fish farming, rail and non-commercial heating, but is to be otherwise abolished.
A ‘Nature for Climate Fund’ worth £640 million was confirmed – it aims to plant 30,000 hectares of trees, covering an area greater than Birmingham over the next five years.
The Government pledged £1 billion for investment in green transport solutions and £500 million to rollout a fast-charging network for electric vehicles over the next five years.
In addition, the Government announced £120 million to repair flood defences damaged this winter. Furthermore, £200 million of direct funding is to be made available for local communities to develop flood resistance. Investment in flood defences over the next six years is to be doubled to £5.2 billion.
The Government is to double investment in research and development to £22 billion a year. Up to £400 million for 2020-21 will be made available for research, infrastructure and equipment as part of an effort to promote world-leading research in research institutes and universities across the UK. There is a focus on physical sciences and mathematics, as £300 million is being made available for experimental mathematic research, something that will please the Prime Minister’s Chief Adviser, Dominic Cummings.
Devolution and regions
As part of the ‘levelling up’ agenda, a new devolution deal was announced for West Yorkshire, which will gain a Metro Mayor from May 2021. The Mayoral Combined Authorities will receive £4.2 billion from 2022-23, as part of a five-year funding settlement.
In addition to its existing support for the OxCam Arc, the Chancellor announced a new rail station will be built at Cambridge South to further improve regional and life science connectivity. The Budget also announced plans to develop a long-term Spatial Framework to support strategic planning in the OxCam Arc.
There are two important aspects of this Budget. Most immediately, it is the measures announced to minimise the impact of COVID-19. Politically, austerity seems to be a distant memory. Once the key slogan of former Prime Minister David Cameron and his Chancellor, George Osborne, the word was not uttered once by the new Chancellor. This was a Budget which promised to splash the cash. According to the Chancellor, the spending plans will see public investment reach its highest level since 1955 and infrastructure is set to receive significant government funding. The key will be ensuring there is a lasting and positive impact with a global pandemic and exit from the EU on the horizon.