“Budgets are nothing if not statements of priorities.”
Rishi Sunak only took over as Chancellor on 13 February, and some would say it was a brave move to stick with the already announced UK Budget date of 11 March. However, he has done just that: and now finds himself with the gathering economic storm of coronavirus to deal with as well.
It’s therefore reasonable to expect him to put some of the more far-reaching, and particularly the more contentious issues, to one side so that he can apply support where it’s most needed: not, of course, forgetting that Brexit stimulus for the economy.
So in this commentary we look at some of the areas where he can set pointers for the future in order to give people hope and opportunity, and some others which he would be best advised not to touch with a bargepole.
As economic growth forecasts have been halved in the past week, it is clear that economic stimulus is needed in short order. We knew that Brexit would require stimulus: now we have the stagnating impact of coronavirus to deal with as well, the economic consequences of which are wreaking havoc with markets.
Interest rate reductions from 0.75% can do very little to help; in fact, in the United States the stock market took an emergency reduction in interest rates as a sign of monetary panic. The stimulus must be provided with Government infrastructure spending, and small businesses must be supported by cash flow liquidity support, as the Bank of England has already mooted (preferably as directly as possible, so that it doesn’t get lost in the clearing banks), and as former Chancellor George Osborne recommended this morning..
Fortunately, plans are well in hand for this infrastructure spending: on hospitals, schools, roads and, unfortunately, HS2: unfortunately, because it is of course going the wrong way - the railway should be heading north alongside the A1 towards Leeds with a branch to Birmingham (i.e. avoiding the bulk of London). But it’s too late to change that now.
Nothing should be done to undermine entrepreneurship and small businesses at this critical time. There has been much written about doing away with entrepreneurs’ capital gains tax arrangements, and there are clearly concerns that Business Assets relief might be changed for investors in small businesses. All this sounds odd for a Conservative administration but, for the avoidance of doubt, none of it should be done - especially at this time. Small businesses are the main engine for new employment, and entrepreneurs are vital for getting them underway - don’t knock them!
So, what pointers could be given for the future to give people right across the United Kingdom hope and opportunity? The answer is to look at the twin pillars for bringing about a more egalitarian form of capitalism: capital participation and inter-generational re-balancing.
Early indications are that neither will get much of a look-in with this Budget. One of our big ‘asks’ has been for a task group to be established in order to explore the way forward, and that may be the best we can hope for. We also asked, for example, for an Investment Club ISA to give people across the United Kingdom more opportunity to learn about, and share in, the benefits of stockmarket investment: the early signs are not encouraging. We’ve also pressed hard, so hard, for the Government to raise the profile of Child Trust Funds for the benefit of c. two million young people whose accounts (worth a total of over £2.5 billion) are lost to them - particularly the most disadvantaged. I’m not holding my breath for this to appear on the Budget shortlist either, but hope I’m proved wrong.
The Share Foundation has started, however, to make major progress in linking CTF accounts to their rightful owners. Its simplified CTF-finder facility has already taken over [1,000] registrations, and the Charity is working with social media influencers and others to get the word out across the country.
We know the message has got through to the Treasury, but has it been heard? We shall discover on Wednesday.
Meanwhile, the Government must be congratulated on its steady hand in responding to coronavirus. Unlike the Italians, who appear to be in emergency reaction mode, and the Americans, who are taking the stance of the ostrich (see our commentary last week), there’s a pragmatic but active balance being taken to ensure maximum safety precautions while trying to keep the economy and business on the rails. It’s early days yet, but so far it seems to be working.
So, Rishi Sunak must show the same ‘Cool Hand Luke’ approach when he delivers his first Budget. But I hope he will not avoid the opportunity to set down some of those pointers for the future: this is a time when we need hope, alongside faith and charity.
Gavin Oldham OBE