Spring Statement provides the details on government funding and new raft of consultations
by Vernon Hunte
“Our companies are in the vanguard of the technological revolution. While our world-class universities are delivering the breakthrough discoveries and inventions that are powering it… our tech sector is attracting skills and capital from the four corners of the earth.”
– Rt Hon Phillip Hammond MP, Chancellor of the Exchequer, Spring Statement
Tuesday saw the Chancellor of the Exchequer announce his first, new format Spring Statement to Parliament. Overshadowed by the Salisbury spy poisoning, this much shorter Financial Statement was devoid of the usual major tax or spending announcements (these will now be limited to the annual Autumn Budget). This meant the Chancellor spent less time at the Despatch Box (a mere 26 minutes) where he focused on the general state of the economy, gave a progress update since the last Budget and announced a new raft of government consultations.
The shorter statement brought the UK into line with most other major countries in having only one fiscal statement announced annually. Happily, for the Chancellor, this had the twin benefit of both pleasing business lobbies and halving the risk of political fallout (it was becoming a common occurrence for Budgets to be torn apart within the first 24-48 hours).
Special praise was given to the tech and university research base. This provided an opportunity to recognise the critical importance of the sector to the government’s Industrial Strategy and vision… and to praise the groundbreaking Matt Hancock app recently released by the Secretary of State for Digital, Culture, Media and Sport.
Announcements – How the money announced at Autumn 2018 is being spent
There was the update on the funding announced during the last statement. For Brexit planning, more than £1.5 billion was allocated to government departments and devolved administrations to prepare for leaving the European Union in 2018-19, leaving the same amount for 2019-20. BEIS, DEFRA, HMRC and the Home Office received the largest allocations.
English cities will have the opportunity to bid for funding from the £840 million allocated for transport infrastructure improvements, following the provision of the same amount to Combined Authorities and mayors. For digital connectivity, the roll out of full-fibre to local areas for fastest broadband, the Spring Statement allocated the first wave of funding – over £95 million – for 13 areas across the UK.
On skills, there will be £80 million to incentivise small business participation in apprenticeships and £500 million to support the roll-out of the new Technical Levels.
Consultation: Taxing tech and digital lead round of consultations
The largest batch of consultations concerned tax and the digital economy. Large digital companies will be feeling wary about a government that has until now largely left the tax system unchanged in response to the rapid rise of the digital economy. Now there is an updated position paper on Corporation Tax and the Digital Economy, which sets ministerial ambition to more effectively tax the profits of those companies. International tax reform is always ambitious, but with the European Commission and other leading nations also keen, it seems that the UK is ready to play its full part in future negotiations.
More specifically, following increasing concern about digital platforms enjoying an unfair tax advantage on traditional businesses, the government is asking how those companies can effectively ensure their users pay the right amount of tax when selling goods or services. The main focus here is on bringing in online platforms to help ensure their members pay the proper amount of tax. The Chancellor said he was willing to work with the European Union on this one, so Ebay, AirBnb and others will be carefully considering proposals in Brussels and Westminster.
Encouraging self-funded training is also under consideration as government puts forward its proposals for tax-relief for upskilling. And in coming weeks the government will be issuing a call for evidence on improving productivity to help remedy the UK’s continuing dismal productivity rates.