Chancellor’s ‘third act’ budget could be the right approach

WITH a General Election fast approaching, all eyes were on the Chancellor for what’s likely to be the final fiscal event before the country goes to the polls.

While pre-budget punditry focused on how to square the circle between limited headroom and voter-friendly tax cuts, businesses were far more interested in understanding the Government’s plan for delivering sustainable economic growth and injecting much needed momentum into the economy.

In what many expected to be a ‘retail’ budget aimed mostly at consumers, the Chancellor kept his focus on addressing the structural challenges facing the economy.

While eye-catching announcements for enterprise were thin on the ground, business leaders can look back on the budget as the Chancellor’s third act in his plan to inject sustainable momentum into the economy. There was also welcome news that the Government plans to build on the full capital expensing announcement made in the Autumn Statement. New draft legislation will extend the provision to leased and rented assets, meaning that even more companies can potentially benefit and invest with confidence in their UK operations.

For the North East, the announcement of a ‘trailblazer’ deeper devolution deal will be welcomed by the business community.

A united region – with further powers and funding than previously secured – will undoubtedly catalyse industry growth.

Where there will be some hesitation is on the ambition for green growth and the transition to net zero.

The CBI’s own analysis shows that the UK’s Net Zero Economy grew by 9% over the last year, emphasising the huge potential of green industries. While the announcement of timings for the new grid connectivity process was welcome, extending the energy profits levy weakens the sector’s competitiveness and sends out the wrong signal to investors desperate to back the country’s push towards green growth.

Finally, one area of missed opportunity concerns the enabling role that business can play in addressing the high levels of economic inactivity in the labour market. With many workers at risk of leaving employment because of ill-health, it was disappointing to not see any movement on our ask to leverage the tax system to deliver on health incentives – such as making Employee Assistance Programmes a fully tax-free service.

For a budget that wasn’t supposed to be ‘for business’, the Chancellor made some reassuring moves that will help generate the economic momentum we need. Sober and sensible might not garner much fanfare, but the Chancellor’s ‘third act’ budget could just be the right approach for these more cautious and restrained times.