David Gauke: Is Britain really set to become a low tax, less regulated, free trading, buccaneering country?

13 Mar

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

Conversations about tax policy can take unexpected turns. It was during one such conversation in the late 2000s – I was the shadow tax minister at the time and developing our plans for corporation tax – that a senior tax lawyer at a city firm recommended a series of books on naval battles.

Peter Padfield’s Maritime Trilogy is, in truth, somewhat broader than that. Padfield alternates accounts of the most important maritime confrontations since the Spanish Armada with a broader account of the social, economic and constitutional development of the great powers.

His central argument is that there is a distinction to be drawn between maritime nations – with linked strengths of sea-fighting, trade, financial innovation and constitutional constraints – and land-based empires. The later relied on closed domestic markets, rigid hierarchies and centralisation, the former distinguished by liberty, flexibility and enterprise.

It is an analysis that many British Conservatives would share and, the argument goes, makes the UK well suited to the era of globalisation. We are historically and culturally accustomed to trade and with that comes a recognition that trading partners have other options. Our prosperity is dependent upon those partners wishing to continue to trade with us. Political stability; the rule of law; paying our debts; limited government; competitive and predictable taxes – all qualities that are necessary to succeed as a maritime nation and in the era of globalisation.

It was in this spirit that the Prime Minister’s first big speech following our departure from the EU was at the Old Naval College in Greenwich where – in extolling the virtues of free trade – he talked of recapturing “the spirit of those seafaring ancestors immortalised above us whose exploits brought not just riches but something even more important than that – and that was a global perspective”.

So how are we doing? Are we on course to be the open, outward-looking nation of which the Prime Minister spoke? Are we becoming a more flexible, enterprising, maritime nation?

My last column assumed that corporation tax rates would increase and argued that this would be a mistake. When I heard Government ministers defend the rise by saying that our corporation tax rates remained the lowest in the G7, I was reminded of my conversation with the tax lawyer.

The lawyer’s argument (which I found persuasive) was that we became economically successful from the 1690s onwards because our model was more like that of a small country dependent upon foreigners choosing to trade with and invest in us, taking inspiration from the Dutch rather than the French. Our modern tax system should seek to emulate this, he argued, encouraging international businesses to locate activities and investment in the UK. Our rates may be lower than other G7 economies but, if we see ourselves as nimble and competitive, our ambitions should be greater than that. A better corporate tax regime than France is not a proud boast.

How about freeports? The name could not be more evocative of our trading and maritime traditions. But the evidence suggests that they will achieve little other than displacing activity from one part of the country to another. And if we were really ambitious about a deregulated, low tax, low customs solution to our economic woes, why give these advantages to some places, why not everyone?

The emphasis on freeports reveals an approach to the levelling up agenda that I worry is more about creating grateful localities in exchange for pots of spending rather than a clear sighted vision for improving productivity. The suspicion must be that the preference for ad hoc ministerial decisions over a more defined industrial strategy will lead to a less economically rigorous approach. The suspicion will linger that party political considerations will be to the fore.

There is one surprising, if qualified, bright spot. We are becoming more open to talent. It was already the case that the requirements to get a work visa were much less restrictive than previously, and the Chancellor’s announcement on the skills visas is worthwhile. The qualification, of course, is that it is still much more bureaucratic for EU citizens to work here than it was – which brings me to Brexit.

Our history as a maritime nation is one often identified by supporters of Brexit – like the Prime Minister in his Greenwich speech. Even the word ‘Brexiteer’ evokes the naval escapades of buccaneers (although the Oxford English Dictionary also defines ‘buccaneer’ as ‘a person who acts in a recklessly adventurous and often unscrupulous way’). Liz Truss tops the ConHome Ministerial popularity charts largely on the basis of her energetic advocacy of Global Britain and for free trade as a benefit of Brexit.

The reality is that Brexit involves the erection of trade barriers with our largest market, as January’s appalling trade numbers suggest (although, to be fair, a clearer picture will only emerge over time). Given the Prime Minister was willing to agree to the Northern Ireland Protocol, it even involves trade barriers within the UK.

While good progress has been made by the Department of International Trade in completing free trade agreements with third countries, these have primarily rolled over existing agreements that we had as members of the EU. There was a flurry of excitement last week when the US dropped punitive tariffs on UK products that were in place because of a longstanding dispute with the EU over Airbus and Boeing. Brexit supporters rushed to declare it a triumph due to our new status, the Trade Secretary wrote a self-congratulatory piece in The Daily Telegraph. A day later, the US announced that it was dropping the punitive tariffs against the EU, too. The search for a trade benefit from Brexit continues.

What about regulatory flexibility? It is nearly five years since we voted to leave the EU, but there are still no bold plans to regulate in a different way. Plans to review workers’ rights have been dropped on the basis that this would be politically unpopular.

If the hard Brexit delivered by the Government has made trade with the EU much harder, the combative manner of our dealing with the EU has not only reduced trust but even undermined a key attribute for a trading nation – the rule of law. Having threatened to breach international law for three months over the autumn, Lord Frost has now decided to extend the grace period before internal checks come into place – unilaterally changing the terms of our agreement with the EU. A second breach of an international treaty only recently agreed begins to look like a habit. It does nothing for our reputation for trustworthiness.

The attributes of an outward-looking, open, trading nation are ones to which we should aspire. But in terms of our openness to trade, competitiveness on tax and adherence to the rule of law we are going backwards. In terms of the State telling businesses what they should do and where they should do it, we are becoming more centralised and more arbitrary.

For years, many in the UK have characterised the EU as centralised, interventionist, uncompetitive and protectionist. It would be a sad irony if our departure from it makes us more like the type of inward-looking, land-based power that we once used to disparage.

Looking back at the Budget a week on, its plan for growth is not convincing

12 Mar

The only worse judgement about a Budget than a snap article is an opinion poll – and we write that regardless of the reception that polls gave last week’s.

For just as a snap view can be based on less than the full picture (a particular feature of Gordon Brown’s), so a polling one tells one nothing about whether a Budget will work, or indeed will be as popular a month after its release rather than a day after.

Our own snap take was largely restricted to asking whether the tax rises announced for future years will really happen at all – or whether Boris Johnson will be able to take advantages of higher revenues to cancel them, and then seek a quick general election.

The end of the week after the Budget may be a better time to take a fuller view.  It would start by trying to understand the position that Rishi Sunak is in.

The post-Budget piece on this site by his Treasury colleague, John Glen, set out the scene as the Chancellor sees it in the latter’s first presentation since Brexit was done in full, and vaccines gave us hope that the pandemic will end.

The economy has shrunk by 10 per cent, the largest fall in over 300 years.  And our borrowing is the highest it has been outside of wartime.

That suggests going for growth in the short-term, as this site has recommended, with fiscal consolidation taking place later, as it will have to do in spades if the growth doesn’t come.  The timing of Rishi Sunak’s measures suggest that he agrees.

We believe that tax rises inevitably have to play some part in that consolidation along with spending cuts, and recognise that the run-up to an election is a difficult time to do either: the Chancellor is cursed by the economic and electoral cycles being out of kilter.

Certainly, government will always have to tax something to pay for public services, and the sensible view is that that something should be spending rather than income (or business).

Which explains why early Thatcher and Osborne budgets alike put up VAT, and why the latter wanted two new council tax bands on more expensive properties – as he confirmed to ConHome last year.

However, Sunak is boxed in on VAT.  The final headline pledge of the last Conservative Manifesto was “we will not raise the rate of income tax, VAT or National Insurance”.

We may know more about his plans for property taxes if any on tax day, March 23rd.  There is a plan on the table to replace council tax (and stamp duty) with a new property tax, but it is revenue neutral.

Since it would already create losers in more expensive properties in London, Sunak is unlikely to adapt it to create even more of them there and elsewhere.

Business rates were a dog that didn’t bark during the Budget, and any eventual reduction to them looks to come largely from a digital sales tax, not a residential property tax.  Some who would pay it belong to an interest group with little direct leverage: foreign companies.

But unable to turn to VAT and unwilling to turn to property – or so it appears – Sunak targeted income tax allowances and business in his Budget, via corporation tax (assuming, as we say, that these hikes ever happen at all).

On the first, the Office for Budget Responsibility says that the allowances freeze will haul a million more people into the higher rate band.  Fiscal drag is scarcely new – as the Institute for Fiscal Studies noted two years ago – but the move will do nothing to improve incentives.

On the second, there are some detailed arguments for the increase, as set out by Anthony Browne on ConservativeHome recently, but a general one against, which is based on certainty.

In essence, lower rates of corporation tax have been a feature of Conservative policy from Thatcher through to Osborne and beyond – together with an emphasis on lower income tax rates, supply side reform and a smaller state.

If these higher ones ever come in, the Chancellor will essentially be trading off higher corporation tax from some companies for the new super deduction for some companies.

That would mean a shift from a relatively simple and neutral system to a more complex and partial one, which would be more likely to help firms in the Midlands and North, according to sources that this site has spoken to.

We are not convinced that such a switch, if it ever happens, is a net plus for Britain.  But now that Sunak has turned on the super deduction it would be best for him, in order to help provide that certainty, not to turn it off in two years.

Elsewhere, those Thatcher-to-Osborne orthodoxies are also in flux.  They were first challenged in recent times not by Johnson, but by Theresa May, with her mantra of “the good that government can do”.

The Industrial Strategy was a product of her approach.  We are all for one in principle if it has a clear aim, namely turning pure research into translational research.

As Greg Clark, who had charge of it under May, conceded yesterday on this site: “it may have tried to do too much in one White Paper”.  His successor, in his swashbuckling way, dismissed in the Commons this week as “a pudding with no theme”.

That directness is a part of what makes Kwasi Kwarteng such an engaging politician, and it may be that he plans a slimming down of the strategy that will deliver results.

But one source close to the process worries that “individual policies will continue anyway but without consistency, ownership or scrutiny”.  And Clark has a point when he says that any strategy must be linked to place as well as sector – in other words, to levelling up.

We’re concerned that the Government has come to see such levelling up as incompatible with supply side reform and institutional change.  We can’t see much of the former in Build Back Better – the Government’s “plan for growth”.

It’s big on intrastructure and net zero; smaller on skills and innovation: as May said in the Commons this week, there’s a limit to how many times Ministers can review research and development tax credits.

If it really wants to go for sustainable and more even growth, the Government will need to devolve more power.  As a former senior Minister put it to ConHome recently: “we can’t deliver levelling up, a skills revolution, an industrial strategy and zero carbon from the centre”

“The new mayors have a convening power: they can get local businesses, the Chief Constable, the NHS bigwigs, the university vice-chancellors, the local enteprise partnerships round the table, and come up with a plan.”

On supply side reform, we understand why Kwarteng killed a planned review of workers’ rights.  But what is the plan to ease supply elsewhere – especially on housing?

On institutional change, there are commitments to reform the civil service and the courts, but almost none that apply to the major public services, especially health.

To date, tax rises are taking the strain of future consolidation, and the danger for the Chancellor is that he finds himself boxed into that position permanently – with Downing Street spooked by the consequences of a proper spending review for Tory red wall seats.

The Budget promises infrastructure spending, possible tax rises, pots of money from the centre for those provincial seats, limited localism, plus some levelling-up but little reform.  That’s a mix of pluses and minuses, but not a plan for growth.

Alan Mak: A week on from the Budget, it’s clear that it will boost innovation and productivity

10 Mar

Alan Mak is Vice Chairman of the Conservative Party, Co-Chairman of the Party’s Policy Board and MP for Havant

The pandemic has had a significant impact on the British economy. Over 700,000 people have tragically lost their jobs and the economy has shrunk by 10 per cent – the largest fall on record. And the impact could have been far worse had it not been for the Chancellor’s support schemes that have protected jobs and livelihoods throughout, from the furlough scheme to billions paid out in business grants and loans.

Last week’s Budget needed to continue this support for the economy in the short term. But crucially, it also needed to lay the foundations for building the economy of the future. What this country needs – and what Conservatives can wholeheartedly champion – is a robustly pro-growth, pro-enterprise and pro-innovation economy to turbo-charge our exit from the pandemic and help Britain lead the Fourth Industrial Revolution, all while remaining internationally competitive.

Last Wednesday, the Chancellor delivered, with a series of policies that will ensure technology and innovation are at the forefront of our economy. ConservativeHome readers agreed, overwhelmingly backing the Budget with 58 per cent saying it was “good” or “very good” in this site’s latest survey, as did voters polled by YouGov.

Last July, I proposed an IT scrappage & upgrade scheme to equip our promising start-ups, SMEs and scale-ups of tomorrow with better software and technology, in order to enhance productivity which has historically lagged behind our competitors. For years, governments have needed to target the least productive SMEs which have invested insufficiently in the latest software, automation or information technology. And too often, our brilliant small firms don’t have the time or resources to get the extra skills or technology tools they need to be more productive.

That’s why I warmly welcome the Chancellor’s two new Help to Grow schemes, specifically aimed at boosting the productivity of our small businesses. Help to Grow Management will help SMEs get world-class management training through government-funded programmes delivered through British business schools, with businesses contributing just £750 or 10 per cent of the cost of the course.

And Help to Grow Digital will level up the digital skills of our small businesses with vouchers entitling them to 50 per cent off the purchase of new productivity-enhancing software, up to a total of £5,000 each. Both these schemes are exactly what’s needed to tackle the UK’s longstanding productivity challenge, while laying strong foundations for the pro-growth future economy we all want to see.

The Budget went further by delivering other measures which high-growth, innovative companies should welcome. These businesses account for just one per cent of companies in the UK, but generate an amazing 80 per cent of our employment growth.

That’s why consultations to find ways to improve our research and development regime and reform the Enterprise Management Incentive scheme to support growing companies retain talent, are encouraging. Furthermore, ensuring firms have sufficient access to capital is vital, which is why the new Future Fund Breakthrough initiative, successor to the Future Fund, is welcome support for innovative tech businesses to access finance, match-funded by Government.

As the first MP of British-Chinese heritage, I also believe a global outlook and attracting world-class talent to the UK is pivotal to our future economic success. That’s why visa reforms aimed at making it easier for highly-skilled people to come to Britain are especially welcome. These include a new unsponsored points-based visa, and new simplified processes for scale-up founders and entrepreneurs.

These Budget measures to support our businesses and turbocharge our future economic growth build on the Treasury’s other impressive pandemic support schemes, such as extensions to the furlough scheme; temporary VAT cuts and business rates relief; two more self-employment grants; new recovery loans to help businesses access finance; and Restart grants of up to £18,000 for businesses who have been particularly hard hit. Overall, that’s over £400 billion of support this year and next to protect our economy.

I also welcomed the Chancellor’s frankness about the need to begin repairing our public finances. We cannot maintain the current levels of borrowing and debt and expect to be able to respond with another £400 billion when the next crisis hits. And as Conservatives, we believe in sound money and keeping our borrowing under control hence the Chancellor also explained why corporation tax is scheduled to rise for the biggest, most profitable businesses in two years’ time.

The unprecedented ‘Super Deduction’ policy to encourage companies to invest in capital assets such as new machinery – an effective tax cut worth around £25 billion – will also be key to incentivising our SMEs to adopt the latest productivity-enhancing technology. Last year I wrote about the dampening effect on capital expenditure (capex) and investment caused by Coronavirus already being large and destructive. The Bank of England predicted a 26 per cent drop in business investment for 2020. In 2009, as the financial crisis erupted, the fall was 16 per cent by comparison. The Super Deduction can help reverse the damage to our country’s technology base.

What we needed to hear from the Chancellor was a mixture of realism about keeping the economy going now, plus a dose of optimism for the future, by laying the groundwork for British businesses to lead the Fourth Industrial Revolution. We received both, building strong foundations for Britain’s growth and recovery.

Neil O’Brien: Lessons we can learn from fast-growing countries to help us to grow faster

8 Mar

Neil O’Brien is co-Chairman of the Conservative Party’s Policy Board, and is MP for Harborough.

Here’s a striking thing: several countries which suffered decades of communism are now richer than large parts of the UK. In 2018, the GDP per head of Yorkshire, Northern Ireland and the East Midlands (where I’m writing from) were all below Slovenia. Wales and the North East were lower: below Portugal, Estonia and Lithuania. All are now poorer than the old East Germany.

Radical change is needed to claw our way back into the top economic league. And unless we raise growth we won’t escape from demographic trends putting upward pressure on taxes. If you look at countries that have enjoyed rapid growth, they have in common a conscious drive to increase their knowledge, investment and technology.

Take the east Asian countries. Japan, Korea, Taiwan and now China, all followed the same playbook and saw dramatic growth.

Between 1945 and 1970 Japan went from a 20 per vent of the GDP per person of the US to two thirds, rising to 85 per cent by the late 80s. When I was born GDP per person in Korea was a quarter of the UK level. Now they are roughly the same. To have seen as much economic growth as a Korean pensioner has in their lifetime, a British pensioner would have to have been born in the reign of George III.

All four invested heavily in bringing new technologies to the country. Through a mix of government support for new industries and control over the financial system they supported firms to enter new higher tech industries, and soak up the inevitable losses as they learned on the job. For example, TSMC, now the world’s leading chipmaker, was a originally part owned by the Taiwanese government. Likewise Korea’s POSCO, now one of the world’s leading steelmakers.

But unlike many poor countries, they used internal competition between firms and global markets to discipline such subsidies. Companies that grew the national knowledge base and proved capable of export success got subsidies, tax breaks, free land and infrastructure; those that failed were ruthlessly culled (the opposite of what we did with British Leyland).

Industry ministries like MITI in Japan systematically researched and plotted the conquest of one industry after another. China’s NDRC and “Made in China 2025” are similar today. Taiwan created a huge science park and established consortiums of firms to share research, development and knowledge.

Various kinds of regulations and incentives encouraged sky-high rates of investment: even after easing off a lot Japan invests about 25 per cent GDP each year and Korea 30 per cent, compared to 17 per cent in the UK. All four went through periods of importing, copying or frankly ripping off western technologies.

Or if that seems too distant, take an example closer to home. Since 1990 average wages in Ireland went from being 5-12 per cent lower than the UK to being 7-15 per cent higher, depending how you measure it. Ireland attracted four times more inward investment than the UK relative to the size of its economy. Those foreign-owned firms have higher productivity: employing 22 per cent of people but accounting for 57 per cent of value added and 70 per cent R&D investment.

Some recent growth has been driven by highly specific and aggressive tax policies. But the seeds of Ireland’s growth were sown in earlier decades, when Ireland opened up to foreign direct investment and introduced a zero tax rate for manufacturing exporters. From the mid 80’s, Ireland specifically targetted investments from higher tech firms: Microsoft arrived in 1985, Intel arrived in 1989, Amazon, Bell Labs, MSD, Google, Twitter and Facebook in the 90’s and 00’s.

The Irish Development Agency operates a sort of concierge service for inward investors, and recent court cases like that brought by the European Commission regarding Apple show how far Ireland has been prepared to go to attract leading tech firms.

What would it mean to learn from these fast-growing countries today?

First, attracting firms with leading knowhow. We’ve done it before: Mrs Thatcher wooed Nissan to Sunderland with tax breaks. Although evidence suggests previous tax breaks increased foreign investment into poorer parts of Britain, we gradually phased them out, only partly due to EU rules. So the creation of the new Office for Investment is a good start.

Second, improving our innovation-industrial system. Total investment in R&D in the UK is just way too low. The UK invested 1.7 per cent GDP on R&D in 2018, China 2.1 per cent, the US 2.8 per cent, Germany 3.1 per cent, Sweden and Japan 3.3 per cent, South Korea 4.5 per cent and Israel 4.9 per cent. Across the world there’s a clear correlation between government investment and business investment.

However, government investment is more geared towards prompting business investment in some countries. We’re now growing government investment in R&D after decades of neglect, but we must also make it more business-focused. Government should implement the proposals set out in a recent NESTA report to support innovation in poorer parts of the UK.

Third, we need to bring the same focus to manufacturing and tech policy that we’ve had for decades on financial services. We have a city minister, and have quite rightly intervened and changed the tax system to promote financial services, because finance has high wages and productivity growth.

But so do manufacturing and IT. Between 1998 and 2018 output per hour grew £20.60 in manufacturing and £22.70 in IT, compared to £11.90 in leisure, £11.50 in retail, £9.50 in admin support services and £7.20 in accommodation.

Outside London, weekly pay in manufacturing is nearly a quarter higher than the economy as a whole. However, over recent decades poorer parts the UK have seen employment dramatically shifting out of manufacturing, and into these slower-growing local services. Though this holds down unemployment, it represents a sort of economic Dunkirk. The pace of this shift has dramatically slowed since 2010, but not been reversed.

Fourth, we need to address the UK’s longstanding low rates of physical investment. As the excellent Plan for Growth published last week noted: “The UK has a lower proportion of innovating firms overall than other advanced economies and weaker business investment”.

One cause of this is that Britain has had the most miserly tax allowances for investment in the G20. So the “super deduction” unveiled by Rishi Sunak last week is a huge step in the right direction. It should boost investment everywhere, but particularly in poorer places where there is more manufacturing.

Last but not least, a lesson from the high growth countries is about making sure that finance serves growth, rather than itself.

Again, the budget saw steps in the right direction. The Hill Review will enable dual class shares, which tech firms (like Google, Facebook, Lyft, Pintrest etc) increasingly use to offset market pressures for short termism. The new Infrastructure Bank in Leeds will catalyse private infrastructure investment, while further extensions of the British Business Bank will support lending and equity for growing companies (it is gradually filling the hole where 3i used to be).

The next challenge is to unlock more institutional investment into venture capital. Sunak has set in train a review of the EU-imposed Solvency II regulations for insurers. Shifting even a small sliver of such vast institutional cashpiles out of gilts and into growth enhancing venture capital could be transformative for growing businesses. There’s also arguments for reviewing similar rules around pensions too.

Making Britain into a tiger economy is a daunting challenge – particularly its less prosperous parts. But the challenges facing other countries at different times have been at least as daunting. If we don’t want a future of ever higher taxes and slow growth, we simply have to make it happen.

ConHome’s survey. Johnson’s rating for handling Covid reaches its highest since last spring.

7 Mar

The Prime Minister’s ratings for dealing with the pandemic started very high, fell as lockdown continued and deaths rose, fell further when the rule of six and a tirering system were introduced, bumped along during the second lockdown and new tiering…and have risen during this third lockdown as the vaccine programme has kicked in.

His 74 per cent rating this month is his highest since last April – and his third highest score overall.  As readers will have seen on Friday, it has not been accompanied by a similar rise in our Cabinet League Table, where he’s up one point since last month and seventh, as he was then.

For the record, his scores for each month since and including last March have been: 92 per cent, 84 per cent, 72 per cent, 64 per cent, 61 per cent, 49 per cent, 30 per cent, 42 per cent, 37 per cent, 45 per cent and 65 per cent.

And here are Rishi Sunak’s scores: 91 per cent, 91 per cent, 87 per cent, 88 per cent, 82 per cent, 84 per cent, 85 per cent, 83 per cent, 77 per cent, 80 per cent, 84 per cent…and 80 per cent this month post-Budget.  That’s his second lowest score tied with December’s, but this is very much a matter of degree.

After all, 80 per cent is a very positive rating – and seven of his other 12 scores are in the low to mid-80s, so this finding can scarcely be argued to represent a dramatic post-Budget collapse.

Our survey. A majority of respondents back Sunak’s Budget. Under one in ten say it was bad.

6 Mar

Rishi Sunak’s ranking in our latest Cabinet League Table – still second; lowest score as Chancellor since Covid; overwhelmingly positive raing – sets the scene for our survey’s post-Budget question.

Add together those respondents who thought that the Chancellor’s plans were either good or very good, and you have 58 per cent – a majority.

Under one in ten believe that Sunak delivered bad Budget: a very different response from that of some of the newspapers that they will read.

You can of course argue that 42 per cent of the replies did not give his plans a thumbs-up, but that is to include the 34 per cent who saw them as a mix of good and bad.  The planned tax rises will doubtless count for some of the bad.

As an exercise, try dividing that 34 per cent by two, and adding half of it to the 58 per cent.  You get 75 per cent – and, as it happens, the Chancellor’s net positive rating in that Cabinet League Table was 74 per cent.

That’s as fair a summing-up of the whole as we can manage.  Finally, a balancing “very bad” category was lost between the conception and publication, for which we apologise.

It’s worth adding that its absence has made next to no difference.  If you think the Budget was very bad, you’ll either tick “bad” as a substitute, or refuse to complete the question.  Only one respondent out of 898 passed on the question, for whatever reason.

Iain Dale: The EU has no interest in Northern Ireland’s future prosperity. It just sees it as a mechanism to exert its power.

5 Mar

Iain Dale presents the evening show on LBC Radio and the For the Many podcast with Jacqui Smith.

Most budgets are curate’s eggs. Good in parts. This one was no different.

Politically, it was a triumph for Brand Rishi. It was well delivered. His post-Budget press conference was slick and smooth. He comes across as a transparently nice and competent individual. That’s because he is.

But was it a budget with a narrative? Was it a “reset” budget? Was it a transformational budget? No, it was not.

It is possible to argue that it couldn’t be anything else than be a budget for the short term, given we have no idea where we will be this time next year, but even if you accept that argument, it disappointed on a number of levels.

The super-deduction measure was innovative and will have a massive event on investment over the next two years. And then it ends. It’s too short term, and should have surely been tapered.

Did corporation tax really need to be increased in one go by six per cent in two years’ time? Wouldn’t a gradual approach have been better, even if you accept it needed to rise. Which I do not.

It’s a tax rise which will inevitably make this country less likely to attract the levels of foreign inward investment in the long term. You can’t argue one day that lowering business taxes is a good thing and makes us more competitive, and then argue that by putting up corporation tax by a quarter still means that we are just as competitive.

Leaving the EU certainly gave some companies pause for thought about locating here, or increasing their presence here. We are lucky that most decided to go ahead anyway, but we do not need to give any company an excuse not to do so.

We may still have the fifth lowest rate of corporation tax among G20 countries, and yes, as Sunak argues, our rate will still be lower than in American, Canada, France, Germany and Italy.

But I’m afraid that argument cuts little ice in a world where the last thing the British government needs to do is do anything to put off businesses considering building a presence here.

Having said all that, two snap opinion polls show that the public approve the Budget with only 11 or 12 per cent disapproving. So from a political point of view, it was job done for the Chancellor. But I still wonder whether a bit more long term, “reset” thinking was needed and that both Sunak and the Government might come to regret that it was largely absent.

– – – – – – – – –

If the pandemic hadn’t happened, surely this Budget would have been all about the post Brexit economy. Brexit wasn’t mentioned directly once in the Chancellor’s speech, although towards the end we heard a few oblique references.

What we needed was a pathway to the future, not just over the next couple of years, but over the next couple of decades. We needed a vision.

Businesspeople needed to be reassured about the future of our trading patterns, not just with the rest of the world, but with the EU. Too many businesses seem to be finding that the so-called “free trade agreement” with the EU is nothing of the sort. The inevitable bureaucratic teething problems in trading with EU countries are still there, two months on.

OK, there are no queues at Dover, but the attitude of (particularly, but not exclusively) of French customs officials leaves something to be desired. I hear time and time again reports that countries deal perfectly happily and efficiently with the US, China or even Russia, yet find it that deliveries to European customers are being returned to them by couriers with no explanation and on multiple occasions. They feel powerless to do anything about it.

And don’t get me started on the Northern Ireland protocol, whose only effect so far as I can see has been to effectively annexe Northern Ireland to the EU. Just as Martin Selmayr threatened.

The EU has no interest in Northern Ireland’s future prosperity. It just sees it as a mechanism to exert its power. It is a constitutional outrage that British companies are not free to trade without restriction to all parts of the sovereign United Kingdom. The checks that are now being demanded by the EU are so disproportionate as to be totally unreasonable. The British government bent over backwards to make a compromise to meet EU concerns that the Single Market could be compromised, but its goodwill has been exploited at every turn.

At some point this has to stop, and the unilateral extension of the grace period is the inevitable consequence of EU inflexibility. It is not, as the Irish government unhelpfully says, a breach of international law. What it is, is a sign that Britain’s patience with the EU on this issue is about to expire.

– – – – – – – – –

I’ve been watching a new documentary on how Donald Trump won the 2016 presidential election called The Accidental President.

It’s made by the British film maker James Fletcher, who is now based in New York. Fletcher will be familiar to many for his work filming David Cameron for the WebCameron project back in the day.

It’s a fascinating account of Trump’s rise to the presidency. There was no narration, no voiceover, just 90 minutes of original campaign footage together with lots of testimony from political commentators, eye witnesses and vox pops.

The most powerful moment was when commentators were asked to name Trump’s campaign slogan. They all trotted out “Make America Great Again”. They were then asked for Hillary Clinton’s campaign slogan. None of them could recall it, bar one, who recalled it was “Stronger Together”. He then followed it up with “whatever that means”.

If proof were needed that political slogans can be all powerful, then we now have it.

Andrew Gimson’s Budget sketch: The Chancellor quotes Tennyson and delivers a lesson in levelling up

3 Mar

“That which we are we are,” the Chancellor declared as he reached the end of his Budget Statement.

Could heavens! Could this prosaic figure be about to raise our spirits by launching forth into the final lines of Tennyson’s Ulysses?

There can be little doubt those words were in the mind of whoever drafted Rishi Sunak’s peroration:

…that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.

Sunak has the benefit of a traditional English education, and will surely have spotted the reference.

But Tennyson’s ending was presumably felt to be at once too lyrical and too modest. For although the Chancellor admitted the economy has suffered its largest fall “in over 300 years”, he had no desire to suggest we have been “made weak by time and fate”.

He adopted instead the manner of a teacher addressing a mixed ability class whom he intends to “level up”, as he put it, even though most of us are not much good at maths, and economics is dismal science we do our best to avoid.

So Sunak had to be slow, and lucid, and conceded that if we would rather leave the economics to him, that would be fine.

“I do want to be honest about what I mean by sustainable public finances,” he assured us, and then, a moment or two later, “I have and always will be honest with the country about the challenges we face.”

Not long afterwards, he said of the changes to corporation tax, “I recognise that they might not be popular but they are honest,” and announced that he wants to be “honest about the challenges facing our public finances”.

Even the dimmer members of the class were starting by now to get the message that the Chancellor wishes us to accept that he is honest, but not all of us were sure we fully understood what he meant by “challenges”, a term other politicians often use when they mean “insurmountable difficulties”.

The Chancellor proceeded to give us a geography lesson. He said that a Treasury which acts for the whole United Kingdom “demands a different economic geography”. In this way, he explained in a level tone, we shall achieve “the levelling up” which we require.

There followed the grand recitation of the eight new freeports in England, stretching from Plymouth to Teesside, after which we hoped to get Tennyson, but were disappointed. Perhaps the speechwriter just had a bet with a friend that he could get a line of the poet into the speech without anyone noticing.

Boris Johnson will certainly have noticed, for his head is full of poetry. He sat listening in a supportive way, emitting audible “hear hears” from behind his mask, but jiggling his right knee up and down in a manner suggestive of unbearable mental tension.

Sir Keir Starmer rose to reply, and was rather good: in a different league to Jeremy Corbyn. Insofar as it is possible to hold an almost empty Chamber, he held it.

But if he is to be Prime Minister, he needs this Government to fail, and Sunak spoke with the self-confidence of a man who has not yet failed at anything.

“I do want to be honest about what I mean by sustainable public finances”. Sunak’s Budget statement. Full text.

3 Mar

Madam Deputy Speaker,

A year ago, in my first Budget, I announced our initial response to coronavirus.

What was originally thought to be a temporary disruption to our way of life has fundamentally altered it.

People are still being told to stay in their homes; businesses have been ordered to close; thousands of people are in hospital.

Much has changed.

But one thing has stayed the same.

I said I would do whatever it takes; I have done; and I will do so.

We have announced over £280 billion of support, protecting jobs, keeping businesses afloat, helping families get by.

Despite this unprecedented response, the damage coronavirus has done to our economy has been acute.

Since March, over 700,000 people have lost their jobs.

Our economy has shrunk by 10% – the largest fall in over 300 years.

Our borrowing is the highest it has been outside of wartime.

It’s going to take this country – and the whole world – a long time to recover from this extraordinary economic situation.

But we will recover.

This Budget meets the moment with a three-part plan to protect the jobs and livelihoods of the British people.

First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.

Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.

And, third, in today’s Budget we begin the work of building our future economy.

Madam Deputy Speaker,

Today’s forecasts show that our response to coronavirus is working.

The Prime Minister last week set out our cautious but irreversible roadmap to ease restrictions whilst protecting the British people.

The NHS, deserving of immense praise, has had extraordinary success in vaccinating more than 20 million people across the United Kingdom.

And combined with our economic response, one of the most comprehensive and generous in the world, this means the Office for Budget Responsibility are now forecasting, in their words:

“A swifter and more sustained recovery” than they expected in November.

The OBR now expect the economy to return to its pre-covid level by the middle of next year – six months earlier than previously thought.

That means growth is faster, unemployment lower, wages higher, investment higher, household incomes higher.

But while our prospects are now stronger, coronavirus has done and is still doing profound damage.

And today’s forecasts make clear repairing the long-term damage will take time. 

The OBR still expect that in five years’ time, because of coronavirus, our economy will be 3% smaller than it would have been. 

Before I share the detail of the OBR’s forecasts, let me thank Richard Hughes and his team for their work.

The OBR forecast that our economy will grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast.

And the OBR have said that our interventions to support jobs have worked.

In July last year, they expected unemployment to peak at 11.9%. Today, because of our interventions, they forecast a much lower peak: 6.5%.

That means 1.8 million fewer people are expected to be out of work than previously thought.

But every job lost is a tragedy, which is why protecting, creating and supporting jobs remains my highest priority.

So, Madam Deputy Speaker,

Let me turn straight away to the first part of this Budget’s plan: to protect the jobs and livelihoods of the British people through the remaining phase of this crisis.

First, the furlough scheme will be extended until the end of September.

For employees, there will be no change to the terms – they will continue to receive 80% of their salary, for hours not worked, until the scheme ends.

As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees.

Nothing will change until July, when we will ask for a small contribution of just 10% and 20% in August and September.

The Government is proud of the furlough – one of the most generous schemes in the world, effectively protecting millions of people’s jobs and incomes.

Second, support for the self-employed will also continue until September with a fourth grant covering the period February to April, and a fifth and final grant from May onwards.

The fourth grant will provide three months of support at 80% of average trading profits.

For the fifth grant, people will continue to receive grants worth three months of average profits, with the system open for claims from late July.

But as the economy reopens over the summer, it is fair to target our support towards those most affected by the pandemic.

So people whose turnover has fallen by 30% or more will continue to receive the full 80% grant.

People whose turnover has fallen by less than 30% will therefore have less need of taxpayer support and will receive a 30% grant.

And I can also announce a major improvement in access to the self-employed scheme.

When the scheme was launched, the newly self-employed couldn’t qualify because they hadn’t all filed the 2019-20 tax return.

But as the tax return deadline has now passed, I can announce today that, provided they filed a tax return by midnight last night, over 600,000 more people, many of whom became self-employed last year can now claim the fourth and fifth grants.

Over the course of this crisis, we will have spent £33 billion supporting the self-employed; one of the most generous programmes for self-employed people anywhere in the world.

Third, we’re also extending our support for the lowest paid and most vulnerable.

To support low-income households, the Universal Credit uplift of £20 a week will continue for a further six months, well beyond the end of this national lockdown.

We’ll provide Working Tax Credit claimants with equivalent support for the next six months.

And Because of the way that system works operationally, we will need to do so with a one-off payment of £500.

And over the course of this year, as the economy begins to recover, we are shifting our resources and focus towards getting people into decent, well-paid jobs.

We reaffirm our commitment to end low pay, increasing the National Living Wage to £8.91 from April – an annual pay rise of almost £350 for someone working full time on the National Living Wage.

And My Right Honourable Friends the Education Secretary and the Work and Pensions Secretary, are taking action to give people the skills they need to get jobs or get better jobs:

The Restart programme – supporting over a million long term unemployed people. 

The number of work coaches – doubled.

The Kickstart scheme – funding high quality jobs for over a quarter of a million young people.

The Prime Minister’s Lifetime Skills Guarantee – giving every adult the opportunity for a fully-funded Level 3 qualification.

And we want businesses to hire new apprentices so we’re paying them more to do it.

Today, I am doubling the incentive payments we give businesses to £3,000 – that’s for all new apprentice hires, of any age.

Alongside investing £126 million of new money to triple the number of traineeships we’re taking what works to get people into jobs and making it better.

Madam Deputy Speaker,

One of the hidden tragedies of lockdown has been the increase in domestic abuse.

So I’m announcing today an extra £19 million – on top of the £125 million we announced at the Spending Review – for domestic violence programmes to reduce the risk of reoffending, and to pilot a network of ‘Respite Rooms’ to provide specialist support for vulnerable homeless women.

To recognise the sacrifices made by so many women and men in the Armed Forces community, I’m providing an additional £10 million to support veterans with mental health needs.

And, on current plans, the funding to support survivors of the Thalidomide scandal runs out in 2023.

They deserve better than to have constant uncertainty about the future costs of their care.

So not only will I extend this funding with an initial down payment of around £40 million; I am today announcing a lifetime commitment, guaranteeing funding forever.

And let me thank the Thalidomide Trust and the Honourable Member for North Dorset for their leadership on this important issue.

As well as supporting people’s jobs, incomes, the lowest paid and most vulnerable, this Budget also protects businesses.

We’ve been providing businesses with direct cash grants through the recent restrictions. These grants come to an end in March.

I can announce today that we will provide a new Restart Grant in April, to help businesses reopen and get going again.

Non-essential retail businesses will open first, so they’ll receive grants of up to £6,000 per premises.

Hospitality and leisure businesses, including personal care and gyms, will open later, or be more impacted by restrictions when they do, so we’ll give them grants of up to £18,000.

That’s £5 billion of new grants; on top of the £20 billion we’ve already provided; taking our direct total cash support to business to £25 billion.

And I pay tribute to My Right Honourable Friend the Member for Romsey and Southampton North for highlighting the particular needs of the personal care sector. 

And, with My Right Honourable Friend the Culture Secretary, we’re making available £700 million to support our incredible arts, culture and sporting institutions as they reopen;

Backing the United Kingdom and Ireland’s joint 2030 World Cup bid, launching a new approach to apprenticeships in the creative industries, and extending our £500 million film and TV production restart scheme.

Even with the new Restart Grants, some businesses will also need loans to see them through.

As the Bounce Back Loan and CBIL programmes come to an end, we’re introducing a new Recovery Loan Scheme to take their place.

Businesses of any size can apply for loans from £25,000 up to £10 million, through to the end of this year.

And the government will provide a guarantee to lenders of 80%.   

Last year, we provided an unprecedented 100% business rates holiday, in England, for all eligible businesses in the retail, hospitality and leisure sectors – a tax cut worth £10 billion.

This year, we’ll continue with the 100% business rates holiday for the first three months of the year, in other words, through to the end of June.

For the remaining nine months of the year, business rates will still be discounted by two thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.

A £6 billion tax cut for business.

One of the hardest hit sectors has been hospitality and tourism: 150,000 businesses that employ over 2.4 million people need our support.

To protect those jobs, I can confirm that the 5% reduced rate of VAT will be extended for six months to 30th September.

And even then, we won’t go straight back to the 20% rate.

We’ll have an interim rate of 12.5% for another six months; not returning to the standard rate until April of next year.

In total, we’re cutting VAT next year by almost £5 billion.

Madam Deputy Speaker,

The housing sector supports over half a million jobs.

The cut in stamp duty I announced last summer has helped hundreds of thousands of people buy a home and supported the economy at a critical time.

But due to the sheer volume of transactions we’re seeing, many new purchases won’t complete in time for the end of March.

So I can announce today the £500,000 nil rate band will not end on the 31st of March, it will end on the 30th of June. 

Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September – and we will only return to the usual level of £125,000 from October 1st.

Even with the stamp duty cut, there is still a significant barrier to people getting on the housing ladder – the cost of a deposit.

So I’m announcing today a new policy to stand behind homebuyers: a mortgage guarantee.

Lenders who provide mortgages to home buyers who can only afford a five percent deposit, will benefit from a government guarantee on those mortgages.

And I’m pleased to say that several of the country’s largest lenders including Lloyds, NatWest, Santander, Barclays and HSBC will be offering these 95% mortgages from next month, and I know more, including Virgin Money will follow shortly after.

A policy that gives people who can’t afford a big deposit the chance to buy their own home.

As the Prime Minister has said, we want to turn Generation Rent into Generation Buy.

So, Madam Deputy Speaker,

The furlough – extended to September.

Self-employed grants – extended to September.

Universal Credit uplift – extended to September.

More money to tackle domestic violence.

Bigger incentives to hire apprentices.

Higher grants to struggling businesses.

Extra funds for culture, arts and sport.

New loan schemes to finance businesses.

Kickstart, Restart, a Lifetime Skills Guarantee.

Business rates – cut.

VAT – cut.

Stamp duty – cut.

And a new mortgage guarantee.

The first part of a Budget that protects the jobs and livelihoods of the British people.

And, Madam Deputy Speaker,

As you can see, we’re going long, extending our support well beyond the end of the Roadmap…

…to accommodate even the most cautious view about the time it might take to exit the restrictions.

Let me summarise for the House the scale of our total fiscal response to coronavirus.

At this Budget we are announcing an additional £65 billion of measures over this year and next to support the economy in response to coronavirus.

Taking into account the significant support announced at the Spending Review 20, this means our total COVID support package, this year and next, is £352 billion.

Once you include the measures announced at Spring Budget last year, including the step change in capital investment, total fiscal support from this Government over this year and next amounts to £407 billion.

Coronavirus has caused one of the largest, most comprehensive and sustained economic shocks this country has ever faced.

And, by any objective analysis, this Government has delivered one of the largest, most comprehensive and sustained responses this country has ever seen.

So, Madam Deputy Speaker,

We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people.

But the damage done by coronavirus, combined with a level of support unimaginable only twelve months ago, has created huge challenges for our public finances.

The OBR’s fiscal forecasts show that this year, we have borrowed a record amount: £355 billion.

That’s 17% of our national income, the highest level of borrowing since World War Two. 

Next year, as we continue our unprecedented response to this crisis, borrowing is forecast to be £234 billion, 10.3% of GDP – an amount so large it has only one rival in recent history; this year.

Without corrective action, borrowing would continue at very high levels, leaving underlying debt rising indefinitely. 

Instead, because of the steps I am taking today, borrowing falls to 4.5% of GDP in 22-23, 3.5% in 23-24, then 2.9% and 2.8% in the following two years.

And while underlying debt rises from 88.8% of GDP this year to 93.8% next year, it then peaks at 97.1% in 2023-24, before stabilising and falling slightly to 97% and 96.8% in the final two years of the forecast.

Let me explain why this matters.

The amount we’ve borrowed is comparable only with the amount we borrowed during the two world wars.

It is going to be the work of many governments, over many decades, to pay it back.

Just as it would be irresponsible to withdraw support too soon, it would also be irresponsible to allow our future borrowing and debt to rise unchecked.

When crises come, we need to be able to act.

And we need the fiscal freedom to act.

A freedom that you only have if you start with public finances in a good and strong place.

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When the next crisis comes, we need to be able to act again.

And while our borrowing costs are affordable right now, interest rates and inflation may not stay low for ever; and just a 1% increase in both would cost us over £25 billion.

And as we have seen in the markets over the last few weeks, sovereign bond yields can rise sharply.

This Budget is not the time to set detailed fiscal rules, with precise targets and dates to achieve them by – I don’t believe that would be sensible.  

But I do want to be honest about what I mean by sustainable public finances, and how I plan to achieve them.

Our fiscal decisions are guided by three principles.

First, while it is right to help people and businesses through an acute crisis like this one, in normal times the state should not be borrowing to pay for everyday public spending.

Second, over the medium term, we cannot allow our debt to keep rising, and, given how high our debt now is, we need to pay close attention to its affordability. 

And third, it is sensible to take advantage of lower interest rates to invest in capital projects that can drive our future growth.

So the question is how we achieve that; how we balance the extraordinary support we are providing to the economy right now, with the need to begin the work of fixing our public finances.

I have and always will be honest with the country about the challenges we face.

So I’m announcing today two measures to begin that work.

Let me take each in turn.
Madam Deputy Speaker,

Our response to coronavirus has been fair, with the poorest households benefiting the most from our interventions.

And our approach to fixing the public finances will be fair too, asking more of those people and businesses who can afford to contribute and protecting those who cannot.

So this government is not going to raise the rates of income tax, national insurance, or VAT. 

Instead, our first step is to freeze personal tax thresholds.

We’ve nearly doubled the income tax personal allowance over the last decade, making it the most generous of any G20 country.

We will of course deliver our promise to increase it again next year to £12,570, but we will then keep it at this more generous level until April 2026.

The Higher Rate threshold will similarly be increased next year, to £50,270, and will then also remain at that level for the same period.

Nobody’s take home pay will be less than it is now, as a result of this policy.

But I want to be clear with all Members that this policy does remove the incremental benefit created had thresholds continued to increase with inflation.

We are not hiding it, I am here, explaining it to the House and it is in the Budget document in black and white.

It is a tax policy that is progressive and fair.

And, I will also maintain, at their current levels, until April 2026:

The inheritance tax thresholds.

The pensions lifetime allowance.

The annual exempt amount in capital gains tax.

And, for two years from April 2022, the VAT registration threshold which, at £85,000, will remain more than twice as generous as the EU and OECD averages.

We’ll also tackle fraud in our covid schemes, with £100m to set up a new HMRC taskforce of around 1,000 investigators as well as new measures, and new investment in HMRC, to clamp down on tax avoidance and evasion.

The full details are set out in the Red Book.

Madam Deputy Speaker,

The government is providing businesses with over £100 billion of support to get through this pandemic, so it is fair and necessary to ask them to contribute to our recovery. 

So the second step I am taking today is that in 2023, the rate of corporation tax, paid on company profits, will increase to 25%.

Even after this change the United Kingdom will still have the lowest corporation tax rate in the G7 – lower than the United States, Canada, Italy, Japan, Germany and France.

We’re also introducing some crucial protections.

First, this new higher rate won’t take effect until April 2023, well after the point when the OBR expect the economy to have recovered.

And even then, because corporation tax is only charged on company profits, any struggling businesses will, by definition, be unaffected.

Second, I’m protecting small businesses with profits of £50,000 or less, by creating a Small Profits Rate, maintained at the current rate of 19%. 

This means around 70% of companies – 1.4 million businesses – will be completely unaffected.

And third, we will introduce a taper above £50,000, so that only businesses with profits of a quarter of a million or greater will be taxed at the full 25% rate.

That means only 10% of all companies will pay the full higher rate.

So yes, it’s a tax rise on company profits. But only on the larger, more profitable companies.  And only in two years’ time.

And I wanted to announce this now because I think for business, certainty matters.

For the next two years, I’m also making the tax treatment of losses significantly more generous by allowing businesses to carry back losses of up to £2 million for three years providing a significant cash flow benefit. This means companies can now claim additional tax refunds of up to £760,000.

And because of the current 8% bank surcharge, the implied overall tax rate for banks would be too high.

So we will review the surcharge, to make sure the combined rate of tax on the United Kingdom banking sector doesn’t increase significantly from its current level and to make sure this important industry remains internationally competitive.

Madam Deputy Speaker,

These are significant decisions to have taken.

Decisions no Chancellor wants to make.

I recognise they might not be popular.

But they are honest.

And let’s consider the alternatives.

The first is to do nothing.

To leave our deficit problem untreated.

Our debt problem for someone else in future to deal with.

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And Nor do I believe it can be the way of a responsible Chancellor.

Another alternative would be to try to find all the savings we need from public spending.

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The only other alternative would be to increase the rates of tax on working people – but I don’t believe that would be right either.

So I believe our approach, while bold, is compatible with our duty as a fiscally responsible and business friendly government.

This is the right choice and I’m confident it will command public assent.

I have one final announcement on business tax.

With the lowest corporation tax in the G7, and a new, small profits rate, the United Kingdom will have a pro-business tax regime.

But we need to do even more to encourage businesses to invest right now.

Business investment creates jobs, lifts growth, spurs innovation and drives productivity.

For decades we’ve lagged behind our international peers.

Right now, while many businesses are struggling, others have been able to build up significant cash reserves.

We need to unlock that investment; we need an investment-led recovery.

So today I can announce the ‘Super Deduction’.

For the next two years, when companies invest, they can reduce their taxable profits not just by a proportion of the cost of that investment, as they do now or even by 100% of their cost, the so-called full expensing some have called for, with the Super Deduction they can now reduce their taxable profits* by 130% of the cost.

Let me give the House an example.

Under the existing rules, a construction firm buying £10 million of new equipment could reduce their taxable income, in the year they invest, by just £2.6 million.

With the Super Deduction, they can now reduce it by £13 million.

We’ve never tried this before in our country.

The OBR have said it will boost business investment by 10%; around £20 billion more per year.

It makes our tax regime for business investment truly world-leading, lifting us from 30th in the OECD, to 1st.

And, worth £25 billion during the two-years it is in place this will be the biggest business tax cut in modern British history.

Bold, unprecedented action.

To get companies investing.

Creating jobs.

And driving our economic recovery. 

Madam Deputy Speaker,

Let me now turn to duties.

This is a tough time for hospitality.

So I can confirm that the planned increases in duties for:

Spirits like scotch whisky.

Wine.

Cider.

And beer, will all be cancelled.

All alcohol duties frozen for the second year in a row – only the third time in two decades.

And right now, to keep the cost of living low, I’m not prepared to increase the cost of a tank of fuel.

So the planned increase in fuel duty is also cancelled.

Madam Deputy Speaker,

This Budget protects the jobs and livelihoods of the British people.

This Budget is honest about the challenges facing our public finances, and how we will begin to fix them.

And this Budget does one other thing:

It lays the foundations of our future economy – the third part of our plan.

If we want a better future economy, we have to make it happen.

We have to do things that have never been done before.

The world is not going to be any less competitive after coronavirus.

So it’s not enough to have some general desire to grow the economy.

We need a real commitment to green growth.

It’s not enough to have a general desire to increase productivity.

We need a real commitment to give every business, large or small, the opportunity to grow, innovate and succeed.

It’s not enough to have a general desire to create jobs.

We need a real commitment to create jobs where people are and change the economic geography of this country.

And we can’t strengthen our domestic economy without remaining a global, outward-looking nation.

This future economy won’t be created in any one Budget, but today we lay the foundations.

Madam Deputy Speaker,

Our future economy needs investment in green industries across the United Kingdom.

So I can announce today the first ever UK Infrastructure Bank.

Located in Leeds, the Bank will invest across the United Kingdom in public and private projects to finance the green industrial revolution.

Beginning this spring, it will have an initial capitalisation of £12 billion and we expect it to support at least £40 billion of total investment in infrastructure.

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Offshore wind is an innovative industry where the United Kingdom already has a global competitive advantage.

So we’re funding new port infrastructure to build the next generation of offshore wind projects in Teesside and Humberside. 

And in November I announced we would launch a world-leading Sovereign Green Bond.

Today we’re going further, announcing a new, retail savings product to give all United Kingdom savers the chance to support green projects…

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We’ve also asked Dame Clara Furse to establish a new group to position the City as the global leader for voluntary, high quality carbon offset markets.

And underpinning all of this will be an updated monetary policy remit for the Bank of England.

It reaffirms their 2% target.

But now, it will also reflect the importance of environmental sustainability and the transition to net zero.

Madam Deputy Speaker,

Our future economy will also address our productivity problem and support small businesses.

Too often smaller firms don’t have the time or resources to acquire the extra skills and training they need to be more efficient, more digital, and more productive.

Thanks to Be the Business, we have made a good start at supporting these firms.

Today, the Business Secretary and I are going further with a new set of UK-wide schemes: Help to Grow.

First, Help to Grow: Management will help tens of thousands of small and medium sized businesses get world-class management training.

Dozens of business schools across the United Kingdom will offer a new executive development programme with mentoring and peer learning, and government will contribute 90% of the cost.

A real commitment to learn more, make more and earn more.

Second, Help to Grow: Digital.

With the pandemic, many businesses have moved online. This has been a challenge. But we want to turn it into an opportunity.

We’re going to help small businesses develop digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software, worth up to £5,000 each.

Both programmes will commence by the autumn; and I’d urge interested businesses to register today on Gov.UK/HelpToGrow.

A real commitment to help over a hundred thousand businesses become more innovative, more competitive and more profitable. 

Madam Deputy Speaker,

A future economy requires us to be at the forefront of the next scientific and technological revolutions.

Becoming a scientific superpower is something we can be; I don’t think that’s hubristic or unrealistic.

Our incredible vaccination programme has shown the world what this country is capable of.

So I’m providing an extra £1.6 billion today to continue the rollout and improve our future preparedness.

And I want to make the United Kingdom the best place in the world for high growth, innovative companies.

So I’m launching two wide-ranging consultations today: to make sure our research and development tax reliefs – and our Enterprise Management Incentives – are internationally competitive.

And, My Right Honourable Friend the Home Secretary knows that a scientific superpower needs scientific superstars so together we’re announcing ambitious, visa reforms aimed at highly skilled migrants, including:

A new unsponsored points-based visa to attract the best and most promising international talent in science, research and tech.

New, improved visa processes for scale-ups and entrepreneurs.

And radically simplified bureaucracy for high skilled visa applications.

Now as well as support for innovation and access to talent, high growth firms need access to capital.

To do that, we’re taking steps to give the pensions industry more flexibility to unlock billions of pounds from pension funds into innovative new ventures launching a new Future Fund Breakthrough, to help fill the scale-up funding gapand changing the rules to encourage more companies to list here.

Let me thank Lord Hill for leading this landmark review, the FCA will be consulting on his proposals very shortly.

Madam Deputy Speaker,

Our future economy depends on remaining a United Kingdom.

Millions of families and businesses in Scotland, Wales and Northern Ireland have contributed to and benefitted from our coronavirus response.

And central to that has been a Treasury that acts for the whole United Kingdom.

That’s not a political point, it’s an undeniable truth.

The majority of today’s Budget measures will apply directly to people in all four nations of the United Kingdom.

And I’m taking further specific steps, with:

Three accelerated Scottish City and Growth Deals in Ayrshire, Argyll and Bute, and Falkirk;

Three more in North Wales, Mid Wales, and Swansea Bay;

And funding for the Holyhead hydrogen hub.

The Global Centre of Rail Excellence in Neath Port Talbot.

The Aberdeen Energy Transition Zone.

As well as the Global Underwater Hub and the North Sea transition deal.

Along with the first allocations of the £400m New Deal for Northern Ireland.

And through the Barnett formula, the decisions I’m taking in this Budget also increase the funding for the devolved administrations, by:

£1.2 billion in Scotland;

£740 million in Wales;

And £410 million for the Northern Ireland executive.

And Madam Deputy Speaker,

Our future economy demands a different economic geography.

If we are serious about wanting to level up, that starts with the institutions of economic power.

Few institutions are more powerful than the one I am enormously privileged to lead – the Treasury.

Along with the other critical economic departments, including BEIS, DIT, and MHCLG, we will establish a new economic campus in Darlington.

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Redrawing our economic map means rebalancing our economic investment.

I have already revised the Treasury’s Green Book; and set out the highest sustained levels of public investment across the United Kingdom since the 1970s. 

But we can go further.

I’m announcing today over a billion for 45 new Towns Deals.

From Castleford to Clay Cross; Rochdale to Rowley Regis; and Whitby to Wolverhampton.

And let me pay tribute to local leaders like the brilliant Mayor for the West Midlands, Andy Street, who are making the case for investment in their area.

We’re also creating a £150 million fund, to help communities across the United Kingdom take ownership of pubs, theatres, shops, or local sports clubs at risk of loss – putting more power in the hands of local people.

And I am launching the first round of the Levelling Up Fund today, inviting applications from local areas across the United Kingdom.

And I’m grateful to My Right Honourable Friends the Transport Secretary and the Communities Secretary for their support on this crucial initiative.

Madam Deputy Speaker,

I have one final announcement that exemplifies the future economy.

A policy on a scale we’ve never done before;

A policy to bring investment, trade, and, most importantly, jobs, right across this country.

To replace the industries of the past with green, innovative, fast growing new businesses.

To encourage free trade and reinforce our position as an outward-looking, trading nation, open to the world.

A policy we can only pursue now we’re outside the European Union:

Freeports.

Freeports are special economic zones with different rules to make it easier and cheaper to do business.

They’re well-established internationally, but we’re taking a unique approach.

Our Freeports will have:

Simpler planning – to allow businesses to build;

Infrastructure funding – to improve transport links;

Cheaper customs – with favourable tariffs, VAT or duties;

And lower taxes – with tax breaks to encourage construction, private investment and job creation.

An unprecedented economic boost across the United Kingdom.

Freeports will be a truly UK-wide policy – and we’ll work constructively with the Scottish, Welsh and Northern Irish administrations.

Today, I can announce the eight freeport locations in England:

East Midlands Airport.

Felixstowe and Harwich.

Humber.

Liverpool City Region.

Plymouth.

Solent.

Thames.

And Teesside.

Eight new Freeports in eight English regions unlocking billions of pounds of private sector investment, generating trade and jobs up and down the country.

I commend Members from across the House for their campaigning…

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Madam Deputy Speaker,

Let’s take just one of those places – Teesside.

In the past, it was known for its success in industries like steel.

Now, when I look to the future of Teesside I see old industrial sites being used to capture and store carbon.

Vaccines being manufactured.

Offshore wind turbines creating clean energy for the rest of the country.

All located within a Freeport with the Treasury just down the road and the UK Infrastructure Bank only an hour away.

I see innovative, fast-growing businesses hiring local people into decent, well-paid, green jobs.

I see people designing, manufacturing and exporting incredible new products and services.

I see people putting down roots in places they are proud to call home.

I see a people optimistic and ambitious for their future.

That, Madam Deputy Speaker, is the future economy of this country.

And so, whilst this last year has been a test unlike any other, that which we are, we are.

The fundamentals of our character as a people have not changed.

Still determined. Still generous. Still fair.

That’s what got us through the last year; it’s what will guide us through the next decade and beyond.

This time last year we set out to deliver on the promises we made to the British people.

But the most important promise was implicit and, in truth, is made by every government, irrespective of their politics.

And that is to do what must be done, when the danger is imminent, and when no one else can.

Today we set out a plan to protect the jobs and livelihoods of the British people, but the promises that underpin that plan, remain unchanged from those we pledged ourselves to twelve long months ago.

To unite and lead.

To level up.

To create a world class education system.

To keep our streets safe.

To keep our NHS strong.

To support the most vulnerable.

To reform and improve public services.

To grow the economy.

To spread prosperity.

To extend the awesome power of opportunity to all corners of the United Kingdom.

And, yes to be honest and fair in all that we do.

Madam Deputy Speaker.

An important moment is upon us.

A moment of challenge and of change.

Of difficulties, yes, but of possibilities too.

This is a Budget that meets that moment.

And I commend it to the House.