Keeping our capital working for the UK

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Every budget is difficult

John Dickie, Director of Strategy and Policy, London First

Every budget is difficult. Chancellors seldom have enough cash to meet the combined needs of the spending departments, let alone the demands from their stakeholders. But this budget will be particularly difficult.

First, there is going to be less money than had been thought. The Office for Budget Responsibility’s predicted £26bn of headroom in 2020-2021 is likely to come down substantially given the very poor recent productivity performance.

And demand for greater public spending is growing after seven years of austerity.  Take but three areas that resonate strongly with Conservative MPs, many of whom are feeling rather bruised after this year’s election. The political pressure to lift the 1% cap on public sector pay across the board is growing.  Canvassing public sector workers who have seen their real incomes fall is never pleasant.  Similar pressures come from the NHS, struggling to cope with a growing, and ageing population. And one of the reasons that Universal Credit’s roll-out is creating political problems for the government is that it is being done on the cheap.

So, not a lot of room for manoeuvre. And the budget won’t even be the most important fiscal event before Christmas. That will be the European Council which may – or may not – see progress towards a transitional deal, which will have more impact on the economy than some budget tinkering.

Given this, what would London business like from the Chancellor?

First of all, we’d like him to set out how the government will make an economic success from Brexit. We have two years to get London, and the UK, into the best possible shape for Brexit and the government must start making decisions now.

We’re not expecting an announcement on Crossrail 2 next week, as it’s not a budget issue, but a positive mention for this vital scheme is always welcome.  The next step here is for the Department of Transport to begin the consultation on the route so that it can be done before the local elections in May.

There isn’t the cash for big tax cuts: but cutting the increase in business rates would be welcome.

And as for new spending, one comprehensive deal the government could agree on is housing: not just more public investment (which is desperately needed) but also improving skills provision; reforming regulation, so that the parts of the greenbelt which offer no civic or environmental benefit can house our growing urban populations; and reforming property taxes, particularly the high levels of stamp duty which discourages people from moving home.  Achieving this through greater devolution to England’s city-regions, so they can tailor the precise details to meet local needs, would be particularly welcome.

Fundamentally, the Government can’t lose sight of what it stands to gain by taking action. If we get this right and grow our economy just 1% faster, London will generate an extra £146bn, helping to create further growth and benefitting the whole of the UK

 

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