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The final spring budget will be a cautious and conservative swansong

As this week marks the last Spring Budget, Freshwater’s specialist public affairs team considers where the chips may fall on Wednesday…

Tomorrow (8 March 2017), the chancellor of the exchequer, Philip Hammond, will present the last ever March budget. From 2018, the budget speech will be moved to spring and will be reserved for responding to forecasts from the Office for Budget Responsibility (OBR).

With the UK’s public borrowing at around 4% of GDP, the chancellor is tasked with keeping to his target of reducing it to 3.5% by the end of the year. He appears to be on track - thanks in part to a rise in VAT and corporation tax receipts in January - so we can expect his announcement to be free from new and big ticket spending flourishes or swingeing cuts. Giving credence to Tony Blair’s recent assertion that the government “has bandwidth for only one thing”, the preoccupation with Brexit means that it is likely to be a cautious budget from the former foreign secretary. 


Business rates rise

The government is looking to revaluate business rates based on 2015 values. As a party traditionally seen as a friend of small business, the Conservative chancellor will look to give support to those businesses hit hardest by the revaluation.

The rates rise is risky and complex, and may provoke stronger calls for a similar process on council tax rates. According to Sajid Javid, secretary of state for communities and local government, only a quarter of all UK-based businesses will be negatively impacted by the change. However, the majority of those businesses are in Conservative strongholds.

Indeed, some of the highest average rates rises come in constituencies such as Runnymede and Epsom & Ewell, held by the chancellor and the transport secretary respectively. Introducing financial relief mechanisms like vouchers to improve broadband coverage, would soften the impact and lessen political pressure.


Social care spending

Caring comforting handsMr Javid has also suggested that new money for social care investment could be on the cards. With the challenging objective to achieve the “integration of health and social care services by 2020”, the current funding shortfall in social care will need serious and sustained attention if the government is to deliver.

With the NHS under massive pressure, the chancellor may look to give money to councils struggling to fund elderly and social care. While this would be billed as empowering local governments, local authorities may see it as being given more responsibility over a highly sensitive area of social policy, at a time when they are already being asked to cover more.


Infrastructure investment

In his last budget, the chancellor committed to several infrastructure investment programmes, but rather neglected digital infrastructure. David Gauke, financial secretary to the treasury, indicated this budget would respond to the National Infrastructure Commission’s ‘Connected Future’ report, which advocated investment in improving digital connectivity and filling the UK’s digital skills shortage, as well as the need for a new 5G strategy. The chancellor may use his time at the dispatch box tomorrow to introduce a digital strategy which utilises UK education hubs and the technology industry to grow the sector.

Only last month, civil service chief executive John Manzoni declared that big data should be part of the nation’s core infrastructure; Mr Hammond may well pick up this theme tomorrow, and point to the Digital Economy Bill (due to receive Royal Assent before the summer) as proof that the digital agenda is already moving forward.


But, Brexit…

However, with the triggering of Article 50 scheduled for mid-March, formally initiating the process for Brexit, the chancellor won’t be taking any risks. While the autumn statement sought to address the issue of Brexit head on, the chancellor will feel no need to do the same in the budget, consolidating a £27bn war chest for a post-Brexit rainy day. This will not be, it seems, a budget for the brave.

 

Freshwater delivers public affairs and strategic communications consultancy services across private, public and not-for-profit sectors.


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