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The 2018 Budget delivered by Philip Hammond was the first since 1962 to be delivered on a day other than a Wednesday, and was moved forward from an expected November date to avoid a clash with the final month of Brexit negotiations in November. Below is our response in relation to some of our key policy interests.
Cities & Devolution
The budget devoted extensive time and funding for the topic of devolution and city deals across the UK. With the devolution agenda ascendant, and with central Government under pressure from the devolved governments for more funding post-Brexit, it was a topic that needed to be given significant attention.
However, despite calls from a consortium of elected mayors, including Conservative Tees Valley mayor Ben Houchen, there were no further details on the UK Shared Prosperity Fund. This is a pot of cash that will replace EU money. Houchen also hoped to see plans detailing how local government could take control of its share of the cash. In an op-ed for the Northern Echo, Houchen claimed that a “devolved” Shared Prosperity Fund would “supercharge our ability to create jobs and maximise growth.”
It is notable that significant investment has been promised for Northern Ireland despite its relative size to Wales. This is likely due to the Government’s confidence and supply agreement with the Democratic Unionist Party.
Low cost credit
Leaked before the Budget but not mentioned in his speech the Chancellor’s commitment to a strong and vibrant social lending sector is buried in the detail of the budget report. Following the work of the Financial Inclusion Policy Forum, the Budget announces new policies to increase access to fair and affordable credit. There is no detail relating to the ‘no-interest loans scheme pilot’ but the government, will launch a feasibility study early next year.
This is an idea that will need testing. It is unlikely to happen very quickly. Probably not at scale and probably for those who are not already insolvent. However, the announcement of £2m to launch the Affordable Credit Challenge Fund is interesting. This will aim to harness the power of the UK’s world-leading Fintech industry to support social and community lenders.
See our Credit Emancipation report which makes the case for a place-based approach to building credit. We argue that improving aggregate credit scores at the local authority level through wide scale adoption of salary linked lending can help to address the problems of unaffordable credit, indebtedness and in-work poverty.
Mr Hammond stated that “our NHS is the number one priority for the British people”. In other words, he knows that this is a key electoral issue which needs to be addressed if the Conservatives are to stay in power at the next election.
The OBR has said this tax will only target around 30 companies. Do the maths, if the Digital Service Tax will only raise £400m a year, that’s less than £15m a year each. Given Google’s most recent £3.8bn fine by the EU Commission (for Android antitrust violations) represented just over two weeks revenue for the company, the Tech Giants will continue to avoid paying their fair share. As our Technopoly report argues only serious reforms to competition law will tackle their dominance.
Brexit and Trade
The budget has been dubbed the “Brexit Budget”, however exactly five months to the day before Britain leaves the EU, Hammond’s financial plan rests on securing a deal with the EU or risk being replaced by an emergency rethink. Hammond is gambling that MPs will back plans to start spending – with his ‘austerity is coming to an end’ rhetoric – rather than risk a messy break with the EU.
The Chancellor acknowledged that, with changes in retail behaviours, our high streets are struggling. These changes were described as ‘irreversible’, meaning that high streets must adapt to thrive. To these ends, the Government have pledged:
The British Chambers of Commerce has supported the announced cut in business rates, after a year where a high number of high street firms have closed. This is a relatively minor financial pledge for Government, but one that is likely to be popular among businesses and local MPs (many of whom are concerned by the demise of local high streets). However, in a year where large businesses such as Debenhams and House of Fraser have struggled, some business groups have cautiously welcomed these announcements as a positive short-term fix. A number believe that longer-term, wholesale change will be crucial to ensure security for the majority of retail workers, who are employed by larger businesses.
The budget saw extra funding for one, specialised, branch of the police. Notably, there were no promises around increasing funding for day to day policing, an area which has been coming under increasing scrutiny, as reported crime has been on the rise. Just last week, the Home Affairs Committee released a report, saying that the police are ‘under serious strain’ and struggling to respond to the changing nature of crime.
These are not radical announcements from the Government considering the Prime Minister’s pledge to make addressing the housing crisis her key domestic policy priority. The tightening of lettings relief does demonstrate that, while the Chancellor believes that entrepreneurship must be encouraged, in the current climate, first time buyers must be prioritised over those moving into the buy-for-rent market.
These announcements will be welcomed as instruments to increasing supply, but measures such as scrapping stamp duty have already come under fire for stoking demand, without truly addressing the problem of supply. Again, these announcements demonstrate that the Government are taking some welcome moves to address the housing crisis, but these are incremental steps, when the country needs bolder moves.
ResPublica’s National Housing Fund proposes a borrow-to build fund, where the Government borrows through a shared partnership with Housing Associations. Our proposal which suggests an investment of £100bn over ten years, is more radical, and more substantial than anything proposed in this budget. It is positive to see government working with housing associations, but we believe that the model for investing and increasing supply needs to encourage the creation of new homes at a much larger scale.
The Chancellor announced an anticipated increase in the Remote Gaming Duty, but campaigners will be disappointed to see that the duty is being set at the lower end of the expected range. Additionally, the implementation of the reduction in the FOBT maximum stake has now been delayed until October 2019. Once again, this will cause outrage among campaigners, who are already suggesting that this is a demonstration of Government’s preference for protecting the industry over the vulnerable.
As ResPublica recommended in The Wheel of Misfortune (2017), the maximum stake on FOBTs must be reduced to protect individuals, their families, and our communities.
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