Wednesday saw the second Budget of the year with the Chancellor hoping for a better reaction that attended the first which unravelled as it became clear that he hadn’t factored in political reaction to raising National Insurance Contributions. That was before the snap election removed any scope for politically difficult decisions. In the new landscape of a minority Government, such bandwith as is available for controversy is reserved for Brexit (which will be taking up plenty) so a boring budget was the order of the Day.
Besides the statistical updates, which generally only interest economists, provided headlines enough of their own. The Office of Budget Responsibility chose this year to bite the bullet and accept that its predictions of a return to form on productivity growth have been so consistently wrong that they needed to be abandoned with all that that implies for lost future wealth creation.
On business issues we were able to welcome the funding that is being made available for Research and Development in connection with the Industrial Strategy, the publication of which we look forward to next week, probably on Monday. On the business tax front, there was a small increase in the R&D Tax Credit Above the Line scheme for larger companies and some changes to the way the Business Rates will be calculated but nothing very significant.
We were disappointed that the Chancellor did not take the opportunity to boost firms looking to break into emerging markets with extra support – particularly for the Tradeshow Access Programme – something the MTA had pressed for in this Budget. We believe that the UK is getting left behind on the world stage because our Government doesn’t back up industry as our competitors do.
The Government also missed an opportunity to reform the way that the tax system treats capital investment. Our Capital Allowances regime is uncompetitive in relation to other countries’ systems and is putting us at a disadvantage when it comes to global investment decisions. This will only become more germane as Brexit wears on and the UK loses some of the attractiveness to foreign direct investment that our single market status offered.