Budget 2018: Plain sailing or rearranging the deck chairs on the Titanic?
by AprilSix Proof
The Chancellor yesterday unveiled his budget which, when looking at the numbers, was one of the biggest giveaway Budgets since 2010. An ‘end to austerity’, abolishing PFI, introducing a tax on tech giants, putting billions into the benefits system, raising income tax thresholds and, most of all, the decision to spend rather than save the extra windfall in the public finances.
An end to austerity? That depends on how you look at it. The promises of extra spending on the NHS, defence and international aid mean unprotected departments will continue to see cuts in every year from 2020-21. It predicts per capita real-terms budgets are set to be 3 percent lower in 2023-24 than 2019-20. And on the wider economy, it says real average earnings are not set to return to their pre-crisis peak until the end of 2024 — representing a 17-year pay downturn.
Brexit may be the word on every political commentator’s lips, but Philip Hammond only mentioned it once during his 1 hour 11 minute speech. The mix of increased spending and tax cuts drew plenty of attention but the underlying message was clear: a no-deal Brexit could risk it all. If this happens, an emergency budget would likely ensue and several of these commitments could be stalled or scrapped altogether.
In terms of pure politics, the chancellor played it well. Conservative backbenchers will be delighted with the focus on tax cuts, fuel duty, the high street and defence. This should make its passage through the Commons relatively smooth. The extra £1billion for Northern Ireland will shore up the Democratic Unionist Party’s (DUP) support too.
The collective feeling is this budget should be viewed with caution. Indeed, the Institute for Fiscal Studies (IFS) called it ‘a bit of a gamble’ as the economic forecasts are reliant on a Brexit that doesn’t throttle the economy – and as the past two years of negotiation have shown, this is far from assured.
Highlights from a science and technology perspective include:
- New 2% digital services tax on large digital firms (with annual revenue of more than £500 million) from April 2020.
- £1.6 billion in new investments for the modern industrial strategy to strengthen the UK’s global leadership in science and innovation.
- £1 billion for investment in Ministry of Defence cyber capabilities
- £235 million to support the development and commercialisation of quantum technologies
- £200 million from the National Productivity Investment Fund to pilot innovative approaches to deploying full fibre internet in rural locations.
- £50 million in a new Turing AI Fellowships to bring the best global researchers in AI to the UK, and £100 million in an international fellowship scheme.
- £20 million in 2019-20 for the UK Atomic Energy Agency to accelerate its ground-breaking work on the development and commercialisation of fusion technologies.
- Further investments in Apprenticeships, including from April, large businesses will be able to invest up to 25% of their apprenticeship levy to support apprentices in their supply chain.