This was a Budget that was long on politics, but short on economics. I have recently challenged whether the Budget speech is still a viable way to deliver the Government’s fiscal plans, suggesting it has morphed into a largely political spectacle. Philip Hammond’s strong focus on housing and the NHS, alongside an absence of any economic substance, reinforced my belief.
Of course, the Conservatives are under great political pressure to address where and how people live, as well as the prospects of the next generation. But, today’s speech contained very little mention of tax, and, in particular, the owners of growth businesses will be left feeling there was little of relevance to them. As to the detail of how the Government will deliver on its commitments to make Britain a ‘hub for enterprise and innovation’ and a ‘country fit for the future’, that, too, was sadly lacking.
One particular point of concern was the Chancellor’s mention of ‘tax avoidance’ and ‘tax evasion’ in the same breath. Clearly, tax evasion is illegal and should be stamped out, but genuine tax planning using government sponsored schemes – such as R&D tax credits – should not be vilified in the same way. When politicians talk about tax avoidance and evasion as if they are the same thing, we are in danger of losing the debate around the right of individuals and businesses to properly and legally manage their affairs.
There is evidently a desire to be seen as a government that is forward-thinking in terms of technology and the digital industries, and that is to be applauded. The UK holds a strong position in those sectors, and further support for innovative British companies to branch out and become true world leaders is, of course, desirable. However, while £500 million of investment in artificial intelligence, 5G, and broadband, as well as the releasing of government location data are positive announcements, for example, it is the private sector that will continue to drive Britain’s tech revolution.
Because of this, it was disappointing to see so little mention of these types of scalable business in Hammond’s speech. There was quite a lot for small businesses, such as the freeze on the VAT threshold and the ongoing review of business rates. But it is companies with the potential for scale that will drive growth and productivity gains. Little was heard to encourage those with a turnover of £50 million or £100 million to push them into the £500 million or £1 billion bracket. These are the companies with the potential to have a genuine and significant impact on the country.
The small print of the Budget document will reveal far more about the Government’s spending and tax plans, and we have been told to await further announcements and White Papers to fill in the detail of much what was announced. But when the Office for Budget Responsibility’s predictions for the economy show a lack of productivity gains and GDP growth sluggish over the medium term, it does cast doubt on whether we can really put trust in the optimism of this style over substance Budget.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.