A Budget of Brexit Blairism

Commenting on the Budget and Spending Review, Ryan Shorthouse, Chief Executive of Bright Blue, said:

“Finally, Boris’s boosterism has defeated Treasury orthodoxy. This is a very different Conservative Government to the ones in the last decade – choosing, as the Chancellor proclaimed, to invest rather than retrench. Today was the definitive farewell to the age of austerity. Really, we are returning to the New Labour days – Brexit Blairism, if you like.

“The economy is in an impressively and reassuringly better condition after the worst of Covid than what was forecast and feared, not least because of the unprecedented and successful measures the Treasury put in place to protect livelihoods, particularly the furlough scheme. 

“The positive economic projections, alongside significant tax rises, enables this Government to both commit to significant real terms increases across all departments and public services over this spending period, and to achieve a current budget surplus by the end of this parliament. 

“However, there is a lot of economic uncertainty, thanks to the capriciousness of Covid, the bureaucracy from Brexit, and the spectre of rising inflation. The cost of servicing the public debt remains very low, but there is a chance of changes to inflation and interest rates which would significantly undermine the sustainability of this. Increased bills and taxes also threaten real household disposable income, already projected on average to be growing annually at dismally low levels. The Chancellor’s new age of optimism could well be short-lived.

“The Chancellor should be applauded for his clear overriding commitment to evidence-based policymaking and prioritising support on low-income workers. Following the lead of the Low Pay Commission on the increases to the wage floor is sensible and significant. The reduction in the taper rate of Universal Credit is surprising and welcome, which will compensate a significant minority, albeit only in part, for the removal of the £20 a week uplift. The restoration of 0.7% of Gross National Income expenditure on Official Development Assistance is a principled and clever move in advance of COP26, although that happens too long away and is subject to the state of the public finances in the years ahead.

“The Chancellor wanted to remind his colleagues that he believes in low taxes and that the government has limits, but there is no denying that this Government is moving in a fiscal direction not commonly associated with the centre-right: higher taxes and higher spending. Public spending is of course crucial, but the real sign of success, as the Chancellor admitted, is improved outcomes. Boris Johnson’s Government is still without truly original policies recognisably of its own to achieve its two big missions of levelling up and net zero.” 

Universal Credit

• The Government is reducing the taper rate of Universal Credit from 63% to 55%

• The Government is increasing the existing work allowance of Universal Credit, available to claimants with children and those with limited capability to work, by £500 a year

• The Government is continuing the increase in the surplus earnings threshold to £2,500 for Universal Credit claimants until April 2023

Commenting, Anvar Sarygulov, Senior Research Fellow at Bright Blue, said:

“The significant reduction in taper rate and the expansion of the work allowance is very welcome, boosting the finances of low-income working claimants at a time of significant financial pressure, partly compensating for the removal of the weekly £20 uplift, and bringing Universal Credit closer to its original vision. 

“But those with very low and no earnings will not benefit and will be significantly poorer as a result of the removal of the uplift. The reduction in the taper rate also disproportionately benefits those claimants on higher incomes, and the evidence is unclear on the effects on work incentives of marginal changes to the taper rate.

“The rising costs of living is putting immense pressure on the poorest households. Even before the removal of the uplift, our research shows that 38% of long-term Universal Credit claimants were behind on household bills. The Household Support Fund will assist with that to an extent, but more targeted help with energy costs could still be necessary to prevent significant hardship during this winter for the most vulnerable.” 

National Living Wage 

• The Government is increasing the National Living Wage will to £9.50 per hour for those aged 23 and above from April 2022, in line with the recommendation of the Low Pay Commission (LPC)

• The Government has also accepted the LPC’s recommendations for the other NMW rates to apply from April 2022

Commenting, Joseph Silke, Communications Manager at Bright Blue, said:

“The Government is right to want to build a high-wage economy, and this is a welcome boost for those who have been on the lowest pay, especially with bills and taxes going up, and after 18 months of pandemic hardship.

“Increasing the living wage should be cautious and gradual as the economy recovers to avoid a negative impact on jobs and prices. Taking the lead from the Low Pay Commission will help to maintain a political consensus on the wage floor.”

Employment support

• The Government is continuing to support the significant increase in work coaches with a £900 million annual spend on work coaches

• The Government is spending an additional £156 million until 2024-25 to provide job finding support for disabled people through more and better trained work coaches

• The Government is funding to extend the Kickstart scheme to March 2022

• The Government is spending £560 million on a UK-wide adult numeracy programme, named Multiply

Commenting, Anvar Sarygulov, Senior Research Fellow at Bright Blue, said:

“Work coaches are one of the strongest features of the Universal Credit system, and further funding to continue to support their training and capacity is essential to ensure that claimants can access the professional and personalised support they need.

“In particular, the additional funding and focus on disabled people is welcoming considering their greater needs, and helps to address the mixed experience that many of them have had in the past due to lack of trained work coaches who could not deliver personalised support. However, similarly dedicated support still needs to be provided to the self-employed, another group of claimants who are more likely to struggle.”

Taxation

• The Government has made up to 400,000 retail, hospitality and leisure eligible for a new, temporary £1.7 billion of business rates relief next year

• The Government has frozen the business rates multiplier for 2022-23

• The Government is introducing a new business rates relief from 2023, which ensures that no business will face higher business rates bills for 12 months after making qualifying improvements to a property they occupy

• The Government is reducing the number of main alcohol duty rates from 15 to 6. The new rates will be in proportion to alcohol content. 

Commenting, Sam Robinson, Senior Researcher at Bright Blue, said:

“Today’s announcements represent a welcome boost to business as we recover from the pandemic. Business rates relief for hospitality and leisure will help those sectors that struggled most in the pandemic, and it is great to see the Government engaging in substantive tax reform by ensuring business rates do not penalise improvements to business property through the new investment relief.

“But there are big questions about the future of business taxation the Chancellor left unaddressed. There was no mention of the future of the ‘super deduction’ beyond 2023, and no clarity on the generosity of capital allowances in the longer term.

“While the design of business rates has been improved, today’s reforms did not address the impact of transitional relief and its disproportionate effect on businesses that see a decrease in their rateable value. And more frequent revaluations of business rates begs the question of why there should not be more frequent revaluations of Council Tax.”

“It may be a small tax, but the changes today to alcohol duties are welcome. Consumption taxes in the UK have long been an arcane mess, and it is great to see the Government finally starting to clear it up. The Government’s ambitions in this area should not stop with alcohol duties, however; VAT is similarly riddled with contradictions and oddities and is ripe for reform.

“The Chancellor has signalled a willingness to engage in meaningful tax reform by improving the core design of business rates and alcohol duties. These reforms are long overdue, but there was little evidence of a broader strategy on tax reform beyond a desire to cut them towards the end of the Parliament. Now is the time to articulate a strategic approach to tax reform that is clear in its objectives and bold in its approach.”

Levelling up

• The Government has allocated £1.7 billion for the initial 105 places that received funding from the £4.8 billion Levelling Up Fund

• The Government has announced the first 21 projects that will benefit from the £150 million Community Ownership Fund

• The Government is establishing a new £9 million Levelling Up Parks Fund for green spaces in deprived areas 

Commenting, Joseph Silke, Communications Manager at Bright Blue, said:

“The Chancellor is right to emphasise the importance of social infrastructure in delivering the levelling up agenda, including investments in parks, sports facilities, cultural hubs, and town centres. Indeed, this emphasis is part of what makes levelling up distinct from previous regeneration programmes. 

“It is positive to see the initial £1.7 billion allocation of investment from the £4.8 billion Levelling Up Fund distributed widely across the UK, including to deprived boroughs in London, which can often be absent from the national conversation on levelling up. 

“However, levelling up remains nascent, and we are now well into the life of this Parliament. The Levelling Up White Paper later this year will need to set out in greater detail how the Government intends to deliver on its ambitious agenda.”

Education and early years

• The Government has announced £201 million for the Start for Life programme by 2024-25, including funding for the creation of a network of Family Hubs in 75 local authorities

• The Government has unveiled a new package of £1.8 billion to help schools to deliver evidence-based approaches to support the most disadvantaged pupils and more learning hours for 16-19 year-olds

Commenting, Ryan Shorthouse, Chief Executive of Bright Blue, said:

“The Government is rightly providing additional resources to support schoolchildren with Covid-19 catch-up. But the scale and speed of catch-up interventions, in particular the National Tutoring Programme, is alarmingly inadequate. The extent of the learning loss justifies radical and immediate remedial action, such as extending school time through longer days or shorter holidays.

“Renewed focus and investment on early years education is very welcome, especially the additional funding to upskill the workforce. There has been a steep decline in skills levels in the childcare workforce in recent years. But this is the most important part of the education system, requiring radical initiatives to attract and retain talent.

“It is exciting that the Government is gradually building up the network of Children’s Centres – now named Family Hubs – again. There’s good evidence now that they improve a range of parental and children’s outcomes. And they are crucial institutions to support civic activity and social infrastructure, since children often are a social glue.”

Housing

• The Government has announced an additional £1.8 billion for housing supply, including £300 million focused on brownfield sites and £1.5 billion on regeneration of underused land 

• The Government has reconfirmed £11.5 billion of spending on the Affordable Homes Programme 

• The Government has reconfirmed £5 billion of spending on improving safety of building

• The Government is increasing funding for tackling rough sleeping by 85% in cash terms since 2019-20, providing £639 million funding by 2024-25, particularly for locally-led, tailored interventions

Commenting, Anvar Sarygulov, Senior Research Fellow at Bright Blue, said:

“The Chancellor heralded big spending sums on housing, but little of it is new. The £11.5 billion Affordable Homes Programme and the £5 billion for removal of cladding have already been announced. Further spending on housing supply is welcome, but is unlikely to seriously address the ongoing affordability crisis.

“To have a chance to deliver on housebuilding targets over the course of this Parliament, and to address the rising and unsustainable cost of housing subsidies in the long-term, the Government needs to commit to building a significant number of social homes, and the current plans fall significantly short of delivering this.”

Transport

• The Government has announced a 50% cut to domestic Air Passenger Duty (APD)

• The Government will also increase in the number of international distance bands from two to three, with new distance bands set at 0-2,000 miles, 2,000-5,500 miles, and 5,500 miles plus, and rates of £13, £87, and £91 respectively for economy passengers 

Commenting, Rebecca Foster, Research Assistant at Bright Blue, said:

“It is peculiar that less than one week ahead of COP26, the Government has announced it will cut APD for domestic flights, where viable alternative means of low-carbon transport exist in Great Britain.

“This appears counterintuitive to the Government’s climate ambitions. By cutting taxes on domestic flights, the Government is making it less attractive for consumers to use low-carbon forms of transport, such as rail.”

Energy and environment

• The Government has allocated £1.7 billion of direct funding for new nuclear energy 

Commenting, Patrick Hall, Senior Research Fellow at Bright Blue, said:

“Net zero has not been at the forefront of this Budget, but it only really confirms funding for the flurry of announcements made last week in the Net Zero Strategy. The most significant ‘new’ green spending in the Budget was the £1.7 billion of direct government funding for new nuclear, likely EDF’s Sizewell C project. 

“It is reassuring to see the Government committing to new nuclear energy, which will be essential in providing a firm, low-carbon baseload for the UK’s energy mix.” 

Official Development Assistance

• The OBR’s fiscal tests are forecast to be met in 2024-25, allowing the Government to make a provisional allocation of additional ODA funds to reach 0.7% of GNI 

Commenting, Joseph Silke, Communications Manager at Bright Blue, said:

“It is encouraging to hear the Chancellor reaffirm his commitment to return UK spending on ODA to 0.7% of GNI, an important tool for Global Britain. Restoring this would reassert the UK’s moral authority and clout on the world stage, support the recovery of the world’s poorest from the pandemic, and help mitigate the impact of climate change and the cost of the green transition in developing countries. Considering we are still fighting the pandemic and COP26 is next week, however, the restoration could have been brought forward.”

Justice

• The Government is providing additional funding to increase the thresholds for means-tested legal aid

• The Government is spending an additional £644 million a year by 2024-25 across courts, prisons and probation services to manage more offenders

• The Government is providing an £80 million cash increase for CPS by 2024-25

• The Government is spending an additional £1 billion by 2024-25 to address backlogs and increase capacity across the justice system with the goal of faster access to justice, including £477mn to fund criminal justice’s recovery from Covid-19

Commenting, Phoebe Arslanagic-Wakefield, Senior Researcher at Bright Blue, said:

“It’s positive to see the Chancellor pledge a 4.1% increase, in real terms, to justice spending over the next three years – pandemic backlogs have very seriously undermined the speed of access to justice in the UK. Though it is good to see additional funding to increase thresholds for means-tested legal aid announced, we need much more detail.”

Immigration

• The Government is providing an additional £85 million resource funding by 2024-25 to reduce illegal migration and deliver the government’s New Plan for Immigration 

• The Government is providing an additional £74 million of capital funding over the SR21 period to replace the Border Force fleet

• The Government is allocating £20,520 per person for Local Authorities who resettle Afghan families, with an additional £17 million available for housing costs and an extra £20 million flexible funding.

• The Government is launching a Scale-up Visa to help UK’s fastest growing businesses access overseas talent, on the proviso of a language proficiency requirement, high-skilled job offer and a salary of at least £33,000

• The Government is launching a Global Talent Network to bring at least 100 innovative, highly skilled entrepreneurs into the UK annually

• The Government is issuing up to 5,000 short-term temporary visas for food and fuel haulage drivers to work in the UK

 Commenting, Phoebe Arslanagic-Wakefield, Senior Researcher at Bright Blue, 

“The Government is focussing resources on reducing illegal migration in a bid to show the public they are controlling our borders. However, stemming spontaneous arrivals must mean opening up new safe and legal routes for those seeking refuge.

“The Scale-up, Global Business Mobility and High Potential Individual visas are very positive, helping British business attract and recruit high-level global talent. However, the UK’s currently struggling with an acute shortage of workers, including in haulage and hospitality, indicating that the current system is not responsive enough. The announcement to issue up to 5,000 short-term and temporary visas for food and fuel haulage drivers is sensible but could well be a short-term and temporary solution for what may be a structural issue.”