What the Chancellor got right – and what he missed out
ADRIAN WADDELL, chief executive of Newcastle business district NE1 Ltd, on what this week’s Budget means for the city
THE Prime Minister has given us the roadmap out of lockdown, and the Chancellor’s Budget this week gave us the financial ticket for the journey.
With all the parameters now set we can start to get the country back open and operating and Newcastle, like other cities across the UK, can now look forward to a gradual return to normality.
For businesses the Budget was the final and crucial piece of the jigsaw. Knowing how the finances stack up will allow businesses to plan, with some degree of certainty, their way out of the crisis.
NE1 has lobbied hard throughout lockdown for greater help for the city’s businesses and so we welcomed the news that the Government intends to continue to provide financial support for the rest of year.
We called for there to be no cliff edge withdrawal of support and were reassured that measures will remain in place as the country transitions into reopening.
We need the country to get back on its feet and businesses need support until they can open and operate without restrictions.
The support package promised, including continuing the 100% business rates holiday until the end of June with reductions until the end of the year; VAT reductions until April 2022 and extending furlough until September are all support measures that NE1 has been lobbying for since last year.
The new Restart Grant Scheme of up to £6,000 for retail, and up to £18,000 for hospitality and leisure is also welcome, especially for those businesses that won’t be able to trade and for whom reopening may still be several months away.
Much of the ongoing business support announced by the Treasury, whilst welcome, also has a tapering off element. Asking businesses to contribute more to support their staff on furlough for instance should only be applicable if these businesses are able to trade, free of restrictions, and so can operate profitably and pay their share. Targeted support will still be needed for businesses that have ongoing restrictions on their operations.
We are pleased that the Government has acted on these primary issues. The real test of their efficacy will be the country’s ability to stick to the roadmap, its timetable for reopening and the clear milestones for businesses to resume trading when it
is safe to do so.
What was lacking, and for us a glaring omission and a major disappointment for Newcastle was the lack of focus on rebuilding and investing in cities.
The Chancellor claimed that the budget was shaped by investmentled recovery and there were lots of announcements about towns and funding but looking specifically at cities there was scant support or focus on investment.
Our cities have borne the brunt of this crisis, and it could be argued have been the hardest hit due to the impact particularly to retail, hospitality and tourism.
Covid has accelerated the pace of change and this can be seen in city centres all over the country. We have seen between 5-10 years worth of change in one year and a lot of this will be permanent.
Certain aspects of city centre life won’t go back to the way they were. We are confident that the leisure sector will bounce back but we are less confident about other areas. Office occupancy, for instance, at the start of lockdown looked likely to return to 80-90%, now businesses are saying that this is more likely to be around 60% or lower.
And, as for retail, the impacts have been far greater and more permanent than anyone could have predicted. With the demise of many major high-street names, cities will look a lot different when they reopen on April 12.
Even before Covid we knew we had a job to do transforming the city centre. We all knew that cities needed to adapt to survive and we knew we needed to bring life and people back in but reshaping the offer would not be possible without significant investment.
Newcastle, like other cities across the country, needed a better deal from the Chancellor but not just in terms of financial handouts. We
needed the Government to address fundamental structural issues that negatively impact city centre economies.
We wanted the Chancellor to tackle the age-old issue of business rates, a thorn in the side of bricks and mortar retail.
For years, we have argued that something needs to be done to level the playing field between bricks and mortar retail and online operators, and that business rates should be abolished in favour, for example, of a sales tax. Sadly, the Budget did not address any of these issues.
NE1 has been campaigning to see the business rates system reformed for almost 13 years and again the business rate review scheduled in the Commons has been pushed back to the autumn with nothing in the Budget on business rates or taxing online retail.
This is hardly surprising. The Government sets business rates depending on the rental value in an area, these rates are then fixed, are nonnegotiable and are difficult to evade generating billions for the Treasury.
Business rates are also a tricky issue due to the ‘multi-channel’ approach taken by many national retailers. With online sales growing, many national retailers with an online and a high street presence are reluctant to tax their new, growth market.
In the debate over what should be done to level the playing field, the waters are also muddied by big names proposing what is best for their individual businesses and not what is best for the country as a whole.
NE1 has consistently called for business rates to be modified to better reflect the additional cost associated with operating high street bricks and mortar businesses. A simple sales tax on everything sold, a pay as you earn system that could provide a better balance between online and bricks and mortar sales.
Instead the one-off, lump sum payment of business rates at the start of April which is not connected to the revenue from a store, is a significant burden on company finances which in turn stifles innovation and creativity.
It is innovation and creativity that is so desperately needed to remodel the city centre. At NE1 we have been championing retail core investment. The pandemic has catalysed these changes that were already underway. What we needed from Government was to rise and meet this challenge and provide a longer term investment deal for our cities, businesses and jobs.
The gargantuan efforts of the NHS throughout the crisis have been absolutely astounding and something we should all take pride in. And, in the short-term, when reviewing our economic fortunes perhaps what is most important is not the budget, or fiscal policy, but the NHS’ ability to get this virus under control, in parallel helping provide the opportunity for our businesses to trade restriction free.
RISHI Sunak’s Budget leaned heavily on the Government’s “levelling-up” narrative that helped it scoop “Red Wall” seats like North West Durham at the 2019 General Election.
It has been confirmed that a £20-a-week increase in Universal Credit is to be extended for another six months and the furlough scheme will continue to September.
Mr Sunak has also promised a ‘mortgage guarantee’ to homebuyers who will need a deposit of just 5% to secure borrowing, and cuts to stamp duty are set to be extended.
A £5bn “Restart Grant” scheme will help firms in retail, hospitality, accommodation, leisure and personal care get back on their feet as lockdown ends.
Residents in Consett have raised concerns about the extension of the furlough scheme, which was originally due to end in April.
Mr Sunak also announced that more than 600,000 people, many of whom became self-employed in 2019-20, will now be able to claim direct cash grants under the SelfEmployment Income Support Scheme (SEISS).
But resident Lindsey Wright, who is a self-employed property developer, is concerned about people ‘frauding’ the scheme.
The 42-year-old said: “With extending the furlough scheme, I personally think people who aren’t disabled or vulnerable should go back to do their own business.
“I’m not eligible for the grant but I worry that people are falsely claiming the grants which will just further damage our economy.”
Another mum-of-two who is a self-employed seamstress and sound engineer was not entitled to the grant.
After struggling throughout lockdown, Victoria Murdy has concerns about the furlough scheme being extended further.
The 33-year-old said: “It’s suspicious that furlough is being continued as everything is supposed to be open by June.
“I had to borrow money from everyone I knew and spend all my savings as I wasn’t entitled to a grant as I have two children and child tax credit and overqualified for it.
“I think that the Labour Party would have handled this better than the Tories.”
The Chancellor also announced that there will be more than £400m in recovery funds for the arts and culture sector.
Busker Nick Cox welcomes the government’s support for people in his industry.
The 65-year-old said: “It’s good. The amount of people who have been out of work during the pandemic is has been so tough
“I’ve struggled. I rely on busking for all my income and with the town centre and the businesses closed it’s been hard.
“I’ve never claimed a penny off the government and never will but glad to see them supporting those in need.”
Resident Derek Cranston is also delighted to see the government taking action to further support local businesses and people who are struggling.
The 71-year-old, who is retired, said: “It’s a great idea – it will help those who struggle at the moment.
“Walking around here is like a ghost town at the moment with no businesses and pubs open. The grants will hopefully help to boost the economy.
“To be honest I think the government have done a good job to help with our recovery.”
First-time buyer Ben Watson has been saving up for a house with his partner for over five years.
After both he and his partner were furloughed they were forced to move back in with his parents as they couldn’t afford rent.
Now with the government announcement that buyers planning to buy a house of up to £600,000 will only need a deposit of 5% to secure a mortgage, Ben is hopeful about the future.
The 24-year-old bar supervisor said: “It is great news. It’s so hard to get on to the property ladder but the lower deposits and stamp duty holiday give us some hope.
“We have both struggled to save with being furloughed, and the fear of losing our jobs makes us doubt we’ll ever get a mortgage.
“But now with this announcement, things are looking better.”