Generally the interventions announced in the Budget have been welcomed, especially the extension of successful schemes such as the Job Retention Scheme. But the success of the budget long term depends on the economy picking up. The outlook for the economy in terms of revenues – remains uncertain, under the OBR’s downside scenario the current budget is forecast to still be running a deficit of something like £85 billion in 2025-26, in which case further tax rises would be likely if the Chancellor is to balance the current budget.
OBR have revised down their predications, and still have very uncertain forecasts. Employment has got worse despite vaccine roll out, as new strains and scaring effects of long term furlough and unemployment is expected to accelerate employment issues. IFS also highlight the issues of the fiscal balance and public spending, and as a lot of commentators pick up there is very little in the budget to support the services local communities need to be resilient which are currently stretched. General consensus is this is another budget dealing with the short term crisis out of necessity but not a lot on long term recovery planning Under the OBR’s central scenario this is the biggest tax-raising Budget since the first Budget of 1993. This would mean that the government would only borrow to invest, with day-to-day spending covered by revenues. Around half of this is achieved by the large increase in corporation tax, and around a quarter by the freezing of income tax, so more people will, over time, drop into this group according to the IFS 4% of adults paid higher rate tax in 1990 by the end of the freeze it will be closer to 10%.
Monitoring the impacts of the pandemic for the last 12 months and looking every week at the implications has highlighted a number of things. Government and state institutions need to help businesses deliver good jobs more than ever before, create thriving communities and rise to the sustainability challenge. Otherwise we face growing inequality through geography, age and ethnicity. Work we are doing in the West Midlands on future trends and scenarios shows that technology and changing nature of work will only exacerbate these inequalities.
The question is does the announcement of the Levelling Up Fund a capital investment programme aimed at regeneration in town centres and investment in cultural and heritage assets help, and how can capital projects be maximised for jobs growth and social mobility? Will the Community Renewal Fund which aims to support people in communities through revenue investment of up to £3m per place, investing in skills, local business, communities and supporting people into jobs be enough at the local level to help places that have been decimated by the loss of jobs in the retail, hospitality and accommodation sectors?
These are critical challenges for the development of coherent and cohesive portfolios of bids at a place level. But with a 15 week turnaround for over 650 bids nationally will places have the capability, capacity and skills to create place integrated portfolios of projects that work together to achieve the goals of the funds? Previous work we have carried out would suggest that the places who have capacity, win more funding. A catch 22 cycle this budget has failed to break, where resources which could have been spent on supporting local places are spent writing competitive bids for funding which could be allocated more successfully on transparent basis of need. Freeing up capacity to think through effective business cases at a local level and integrated approaches. The Budget is trying to tackle long term structural path dependencies exacerbated by the pandemic, but there is very little in the budget to increase capacity in the local institutions recovery and resilience relies on.