A ‘tentative’ step to increase confidence
Philip Hammond has been pulled every which way since he first climbed the steps of No 11 Downing Street. Yesterday’s Budget saw him try to heave the government out from between several rocks and a dozen hard places.
The next few days will see journalists and economists crunching the numbers and scanning the small print of the Budget for hidden announcements. As an early verdict, though, I think that businesses will feel that while the Chancellor didn’t show them the stick, he also failed to produce a carrot of any significant size.
In fairness to Mr Hammond, he touched on a number of key challenges facing the business community, not least the urgent need to increase productivity across the board in the face of grim forecasts from the Office for Budget Responsibility.
He also recognised the need to boost the number of businesses being founded in developing sectors of the economy and increase the number of fast-growing firms across the board.
In this light, the announcement of more cash available via the British Business Bank for investment in scale-ups and a doubling of the allowance to invest via the Enterprise Investment Scheme in knowledgeintensive businesses will be cheered by entrepreneurs and investors alike.
There were specific fiscal nuggets in there for Scottish employers too, driven – the Chancellor was at pains to say – by lobbying from the fresh intake of Scottish Conservative MPS in 2017. Increased incentives for new investment in the North Sea, alongside city and growth deals for Tay, Stirling, and the Borderlands all made their way into the speech, and will be welcomed.
However, we should look at the over-arching question facing companies on the back of yesterday’s speech. Was there enough in this Budget to get the business community as a whole investing at a time when costs are generally up, big new regulatory measures are on the horizon, and political certainty is languishing in the doldrums? The answer is probably not.
One of the great lines in JRR Tolkien’s epic The Lord of the Rings trilogy comes from Bilbo Baggins, when he says: “I feel all thin, sort of stretched: like butter that has been scraped over too much bread.” The sentiment will have a lot of resonance for the Chancellor, who under tight constraints has produced a Budget with something for everyone, but few will feel it has been enough.
Scottish businesses are due for their second bite of the fiscal cherry in just a few weeks’ time when the Scottish Budget is unveiled, and they know that Derek Mackay is facing no more easy decisions than Philip Hammond.
With a tentative hike in income tax rates already mooted by the First Minister, many employers across Scotland are already steeling themselves for more of the language of hard choices and uncertainty.
Philip Hammond has taken only a tentative step towards boosting confidence and investment. Derek Mackay should take another.