Today’s budget mentioned a future of change and opportunity but Philip Hammond may find his outlook hamstrung by a downward revision of UK growth
The chancellor’s tech focused budget cannot mask lower predictions for UK growth. Hoping to provide a budget that recognised that “the world is on the brink of a technological revolution,” Philip Hammond aimed to deliver initiatives that made sure “for the first time in decades, Britain is genuinely at the forefront of this revolution”. However, the feasibility of his plan to support innovative, technology-based business was clearly questioned by the substantial write-down in the growth prospects of the UK economy by the Office for Budget Responsibility.
Opening his second budget speech as chancellor, Hammond’s address gave an optimistic rhetoric, painting a “prosperous and inclusive economy, hub of enterprise and innovation”. Such ambition was in contrast to the OBR’s latest statistics which lowered March’s predication of 2% growth for 2017 by a quarter, revising it to 1.5%.
The UK’s economic outlook represents its slide from the fastest growing economy in the G7, to the slowest. The OBR predicted an ongoing contraction of growth, to 1.4% in 2018 and 1.3% in 2019 and 2020, before a return to 1.5% in 2021.
No doubt fully aware of the incremental nature of tech potential the chancellor pledged to offset such sluggish growth by encouraging technology sector investment and development. Announcing a £500 million investment in 5G and artificial intelligence, a tech pioneer fund and a geospatial data commission, Hammond claimed, that while some chose to “reject the future, we chose to embrace it”.
Seeking to complement government provision with private sector investment, the budget also details an action plan to “unlock” £20 billion of investment and to provide a continuation of the EIS tax-relief scheme for knowledge based companies. Such investment attracted a cautious welcome: “The true measure of a revolution is how it impacts the everyday lives of people,” said one UK based fintech CEO. “I welcome this investment into innovation in the tech start-up industry but strongly believe that we must judge ourselves on the end result of how it improves the lives of those who use it.”
Elsewhere there was a £600 premium incentive per-pupil carrying on maths at A-level for schools and infrastructure investment in electric car charging and driverless car research. The chancellor also sought to extend the technology “revolution” beyond London, allocating further infrastructure allocation for the Northern Powerhouse and the “Midlands Engine”, as well as an extra £2 billion for Scotland and an extra £1.2 billion for Wales. The deficit was also targeted with the chancellor reporting he hoped to reduce this to 1.1% by 2022, with government debt representing 79.1% of GDP, compared to the current 2.4%. Hammond was clear in his reasoning for targeting the deficit, saying “excessive debt undermines our economic security, leaving us vulnerable to shocks [and] passes the burden unfairly to the next generation.”
Although the chancellor followed industry recommendations by initiating a skills and distance learning programme, there was no mention of access to, or encouragement of, skilled workers and talent from overseas. However, there was an extra allocation of £3 billion to help Brexit “preparations” and a pledge to commit more if needed, a clear indication that it would be erroneous to plan on a known Brexit outcome.
That outcome will no doubt inform the “future that will be full of change; full of new challenges and above all full of new opportunities,” that the chancellor described. However, following the revision of UK growth, those “challenges” may be more than just a caveat.
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