Budget benefits for Wales must be maximised now
IT WAS never going to be an easy task for the new Chancellor of the Exchequer to deliver a Budget four weeks into his new job and with the growing crisis of the coronavirus outbreak at the front of everyone’s mind.
But from the point of view of the majority of firms, many would agree that he succeeded in making this the most business-friendly budget for some time.
We already knew some of the decisions before he stood up in the House of Commons, such as postponing any further reductions in corporation tax to help pay for additional public sector expenditure.
However, at a time when UK businesses are operating in a low-growth environment, there was a need for boosting the situation in the short term while setting out a longer-term view of the direction for the economy.
Obviously, the headlines were his efforts to support firms during the expected shutdown over the next few months to control the Covid-19 virus, such as full business rate relief for the majority of small firms (which many expect the Welsh Government to duplicate immediately) and, perhaps more importantly, the Government-guaranteed loans that will enable businesses to have the funding needed to survive and grow during this period.
Not surprisingly, there was also a range of other announcements that will continue to support an enterprise culture in the UK, including the extension of the Start-Up Loans programme, more funding for R&D tax relief and indications that certain key industries such as FinTech will attract more Government support in the future.
There is also additional finance being made available for long-term growth capital of around £200m next year which, all things being equal, would mean £40m for Wales. Given this, the Welsh Government should present a strong case to the British Business Bank, as part of the new “levelling-up” philosophy, to make this amount of funding available to Welsh firms and, more importantly, to match it up with a further £40m from the Development Bank for Wales. That could finally give larger Welsh businesses the sustainable funding they need to grow substantially over the next few years.
Some will find it disappointing that there was not more done in terms of encouraging UK businesses to start spending the estimated £737bn they have accumulated on their balance sheets due to the uncertainty of Brexit. There was also very little mention of skills and how the tax system could be used, as in other progressive economies, to encourage firms to spend more on upskilling their workforce. Of course, there is a further Budget later this year and these could still be areas which the new Chancellor could focus on to boost the UK economy.
Some of the incentives mentioned in the Budget will only apply to England, such as the investment of £10m to increase Growth Hub capacity to provide high-quality, core business advice and guidance to firms and the expansion of the British Library’s network of Business and Intellectual Property Centres to English cities.
If businesses in Wales are not going to be left behind competitively, then the Welsh Government must explore how it can also deliver such valuable business support.
Perhaps the clearest indication for this Government’s longer-term policies came in the reiteration of their support for a high-skill, high-wage economy by increasing investment in science, innovation and technology to £22bn by 2024-25.
Given that Wales has one of the lowest levels of research expenditure by the private sector in the UK and attracts only 3% of all UK research funding via its universities, then this could provide a boost of over £1bn over the next five years if it was devolved.
But will this happen? It will need considerable lobbying from Welsh politicians and this is certainly no time for “clear red water” between Cardiff Bay and Westminster on this issue.
It is critical to the future of the Welsh economy that the Welsh Government and the Wales Office work hand in hand to ensure that we maximise the research and innovation funding to both higher education and businesses here in Wales.
Another key announcement was the decision to support the Western Gateway, a strategic economic partnership across south Wales and the west of England, to oversee an independent economic review to identify long-term economic opportunities for the region.
The challenge here is whether the UK Government sees this fledgling economic region to be as important to the future of the UK economy as both the Northern Powerhouse and the Midlands Engine, both of which look set to attract serious levels of investment as part of the strategy to improve investment outside of London and the south-east of England.
There is also the issue of the new proposed UK Shared Prosperity Fund which will replace EU Structural Funding, a source of support Wales has disproportionately benefited from during the past two decades.
The good news is that the UK Government reiterated its promise in this Budget to match current levels of funding, which means that Wales should not lose out financially, although there is also the opportunity to shape this fund into something which finally focuses on increasing the poor productivity of the Welsh economy.
Therefore, not many would argue that Rishi Sunak has not done his part to support the UK economy in his first Budget and the direction of travel is certainly one that focuses more on competitiveness through innovation than we’ve seen in the past.
There is certainly much more to be done but many Welsh businesses will hope that politicians from all parties will now work together to ensure that many benefits on offer to Wales via the range of different measures in this historic Budget are maximised. ■