UK Budget 2020 review
The UK Chancellor today announced a £30bn fiscal stimulus package which would amount to around 1.5% of GDP.
There has been no indication, yet, of the growth forecasts, after taking account of the impact of the coronavirus outbreak, which will pay for the associated spending pledges.
Zero carbon economy
The Chancellor missed a key opportunity to announce the Treasury’s commitment to developing a clear, coherent tax and spending strategy to support the UK’s commitment to a zero-carbon economy.
The announcement of £800m worth of investment in two or more carbon capture and storage clusters by 2030 is suggestive of an approach which aims to innovate its way out of emitting carbon. However, an ambitious transition away from fossil fuels needs take-up by consumers to occur in the near-term and R&D, whilst important, tends to deliver change in the long-term.
The Chancellor did not announce that he was ‘getting it done’ on tackling the much more thorny issue of radically changing consumer behaviour to curb carbon emissions.
It is difficult to square maintaining the fuel duty freeze with the government’s commitment to net zero by 2050, especially in the year that the UK hosts the COP26.
According to Carbon Brief, the fuel-duty freeze has increased UK CO2 emissions by up to 5%.
On a positive note, the investment in charging infrastructure and continued incentives to purchase low emission vehicles are welcome steps.
However, the budget was essentially silent on measures to promote energy efficiency, especially tackling the heat-leaking UK housing stock which requires a long-term heavy investment strategy.
The Budget included a positive announcement on other fossil fuels. Making gas more expensive relative to electricity (for businesses) will help to drive the transitions that are needed – both fuel-switching and improved energy efficiency.
Lastly, a plastics tax is a push in the right direction, but it will take more than this to wean consumers off plastics for good.
The Chancellor’s £600bn pledge for infrastructure and industry will help to redress historic under-investment in the UK’s rails and roads. As enablers of our regions’ economies this is key.
A pledge to build the Manchester to Leeds high-speed rail link as part of Northern Powerhouse rail is welcome, helping to complete the HS2 triangle, however stopping short of extending this line to Liverpool seems short-sighted.
The Chancellor’s intention to take forward the Midlands Rail Hub is a positive step. Publication of the National Infrastructure Strategy (due to be published last week) should outline the details.
The measures to raise the National Insurance threshold were expected and welcome.
A new ambition for the National Living Wage to eventually reach two-thirds of median earnings, and cover more workers, is progress towards improving living standards among the low paid.
Green Book review
The Chancellor announced a review of the Green Book guidance on how to assess and compare policies.
While the scope of the review is not yet known, there have been growing concerns that the existing methods are not able to take full account of the environmental impacts of schemes.
Moreover, the current guidance may be doing little to help address regional imbalances in infrastructure investments.
A review of the Green Book could help policymakers better weigh up the relative merits of different schemes, potentially unlocking important regeneration and transport schemes in less prosperous regions. This may be an opportunity to contribute to the government’s stated aim of “levelling up” the economy.
Welcome news on business rates holidays for some businesses in an attempt to alleviate the impact of the coronavirus.
It remains to be seen whether the announced review of the business rates system will deliver any change that can support High Street regeneration.
The Chancellor failed to say that he was ‘getting social care done’, another critical long-term issue for which action offers little in the way of short-term political benefits.