Budget 2018 preview: everything looked at through a Brexit Lens
When the Chancellor approaches the Despatch Box on 29 October, everything he says will be looked at and filtered through a Brexit lens.
With exactly five months between the day of his Budget and ‘Brexit Day’ on 29 March 2019, it’s impossible for it to be any other way.
The Chancellor has many challenges – for me (and for our clients) the most demanding is how to balance the need to retain and sustain confidence and robustness in the economy, while also preparing the country for a Brexit, the shape and detail of which still remains unclear.
He cannot ignore Brexit – the electorate wants to hear what he has to say and business wants to know that the Treasury has it under control. But he cannot let Brexit force him into short-term decisions that might have unintended consequences down the line. Like any canny Chancellor he needs to maintain maximum flexibility while ensuring he is seen to be actively managing the issues that need to be addressed now.
The Chancellor has form of course. In his previous Budget, he managed to say a lot without actually saying very much, as some of the commentators put it at the time.
Here’s what I would like to hear more on:
- Measures to support robustness in the economy: with the uncertainties already in the air over Brexit, the last thing we need is a tinkering Budget that fiddles with technical areas and just provides more things for businesses and individuals to distract them from Brexit. If anything I’m hoping for less not more red tape. Put simply, steer away from anything that destabilizes the economy or risks damaging confidence.
- Action on housing: this Government has nailed its colours to the mast as an administration committed to providing more housing. The affordability and availability of somewhere to live is a visceral issue that concerns all generations. There have been enough encouraging noises but they need to be backed up by action to stimulate the market, including more affordable/social housing. This is both an opportunity for the Government and a necessity.
- Prominence for skills and labour: Brexit has put the availability of skills and labour into even sharper focus. Changes to freedom of movement present a real and significant risk to employers operating in sectors from hospitality to agriculture and manufacturing to construction. I’d like to see more on incentives for businesses to invest in skills and skills development. To see measures which recognise the value to the economy of businesses investing in people. A large part of the Brexit conversation is about enabling the UK to compete on the global stage – it will only do that with skilled people and enough of them. I’d like to hear more from the Chancellor on his plans to secure greater investment in people and to create the conditions which help businesses and employers to train and retain staff.
Of course, I’m also expecting to hear further messages about the ‘end to austerity’ and the £20bn for the NHS (again) – but those are chiefly political messages to an electorate being courted by promises of public sector spending and public sector investment by the Labour party. Any measures here will be for the ears of the electorate more than the pragmatism of managing the economy. It is too early for Philip Hammond to make strategic moves on any of those issues ahead of Brexit.
I also expect to hear from Hammond that he wants to do more about the corporates and individuals, enabled by the digital economy, who are ‘not paying their fair share of tax’. Whether this will result in some tougher regulation in the gig economy and for the self-employed is more doubtful. I think he will want to show his teeth as well as his softer side and these groups might be "acceptable targets". The challenge is the risk of choking off these digital firms which are otherwise making important contributions to the overall UK economy and its competitiveness – and future success.
Back to Brexit, I’m hoping the Chancellor will recognise the value, indeed necessity, of flexibility and keeping his options open. Do as little as you can and retain room for manoeuvre. With so many variables in the mix, he must resist the temptation to ‘get the country ready for Brexit’ when no-one is precisely sure what that might look like and how long our transition to depart the EU might take!
A Budget which focuses on sustaining economic robustness, invigorating housing and stimulating skills would be one I would very much welcome. Here’s hoping we get some of that on 29 October.