Spring Budget 2017: Madano Overview and Analysis
Headline Statements and Announcements
- The Office for Budget Responsibility’s (OBR) growth forecast was upgraded for this year from 1.4% to 2%, but GDP was downgraded to 1.6% for 2018, 1.7% for 2019, 1.9% in 2020, and 2% in 2021.
- Borrowing is forecast to be lower than previously predicted, expected to fall from £58.3 billion in 2017-18 to £16.8 billion in 2021-22; however, public debt is forecast to peak as a proportion of GDP at 88.8 % in 2017-18.
- The Government is continuing with austerity and reducing public sector debt; Mr Hammond stated that he will remain “undistracted” by short term factors or the “reckless policies” suggested by Labour when pursuing this agenda.
Madano Comment: The Budget was light on policy, particularly when compared to previous years. This is likely due to the restructured form for Annual Budgets announced at last year’s Autumn Statement, which will see a Spring Statement and the Budget in the autumn from 2018. The Chancellor was criticised by opposition MPs for making only brief reference to major issues such as Brexit and climate change.
Impact on specific sectors:
Energy and Environment
- In response to calls for tax relief for late-life oil and gas assets, the Chancellor announced that the Government will publish a discussion paper examining permitting tax history transfers between buyers and sellers of oil and gas assets.
- Government remains committed to carbon pricing to help decarbonise the power sector. Further details on carbon prices for the 2020s will be set out at Autumn Budget 2017.
- The Levy Control Framework will be replaced by a new set of controls, to be outlined later this year.
Madano Comment: Environmental groups criticised the Government for promising further support to oil and gas companies while failing to address concerns on climate change, the future energy mix or the Green Investment Bank. The omission of reference to the solar industry when discussing business rate reforms could elicit a negative reaction from the renewables sector.
- The Chancellor announced that the Industrial Strategy Challenge Fund (ISCF) will provide an initial investment of £270 million in 2017-18 for the development of disruptive technologies.
- This will include areas such as batteries and robotics systems to operate in extreme and hazardous environments, including off-shore energy and nuclear power.
- Through the National Productivity Investment Fund (NPIF), £740 million will be invested in digital infrastructure by 2020-21.
- The Government will also invest £200 million to fund a programme of local projects to test methods of accelerating market delivery of full-fibre broadband networks.
- New ‘T Level’ qualifications, supported by maintenance loans, will bring parity of esteem to technical education and include a three month work placement for every technical student.
- The Northern Powerhouse Investment Fund (NPIF) will invest £250 million over the coming four years in high-skilled research talent.
- This will include £90 million for an additional 1,000 PhD places, of which 85% will be in STEM disciplines and 40% will strengthen collaboration between business and academia.
- A further £160 million will support new fellowships for early and mid-career researchers in areas aligned to the Industrial Strategy.
Madano Comment: The Chancellor focussed on skills, but has faced criticism for failing to match ambition with appropriate resources. Labour Party Leader Jeremy Corbyn led calls for far greater funding for skills and ensuring that workers are able to retrain for the jobs of the future.
Regions and Devolution
- The Chancellor announced that a ‘Midlands Engine Strategy’ will be published on Thursday 9th March.
- In addition to City Deals for Edinburgh and Swansea, the Government has begun negotiations for a Stirling City Deal and is looking at proposals for a Tay Cities Deal and North Wales Growth Deal.
- A Memorandum of Understanding on further devolution to London, including a pilot scheme on a new approach to infrastructure funding, has been signed with the Mayor of London.
Madano Comment: The Government’s devolution agenda was firmly grounded in ensuring there is better engagement with business. Despite this, there was no mention of the proposed Swansea Bay Tidal Lagoon amid references to continuing work on the Swansea City Deal.