Jeremy Hunt’s first job was creating stability – can he now manage growth?

Director and Head of Public Affairs Adam Thomas reflects on today’s Budget.

An expected steady-as-she-goes Budget turned out to have wind in the sails for some voter groups – motorists, parents, fans of draft beer and, most notably, pension savers were winners today.

Growth, Chancellor Jeremy Hunt insisted, was still the priority, although he stressed that spending was fully costed in a predictable further tidy-up after the mini-budget.

The long-term question of how to improve growth remains stubborn. One of the Chancellor’s fixes was a focus on the ‘economically inactive’ – around 500,000 people who have exited the jobs market recently or are not actively looking for work.

As a Tory leadership hopeful last summer, Hunt wanted to cut corporation tax to 15%. Today he found himself putting the top rate up to 25%. His offset of new ‘full expensing’ investment incentives for infrastructure and machinery at 100% is less generous than the current super deductions of 130%, which will end in next month. Hunt insisted today that he was pro-business and that only 10% of firms will pay the new top rate of corporation tax in any case. As part of the push towards science entrepreneurship, he also announced an R&D enhanced credit package of support, hoped to help 20,000 research-intense SMEs.

The Chancellor accepted all of Patrick Vallance’s recommendations to boost key growth sectors, including an AI sandbox to help innovators get to market and £900m of funding for an exascale computer. The 10-year Quantum Strategy of £2.5bn for computing makes funding available for industry and universities as part of a  bid to be home to the ‘next Silicon Valley’.  However the amount of money pledged for an investment programme is lower than equivalents in other countries, including France, Germany, the United States and China. Future regulation of AI remains sketchy, although the Government has moved away from the controversial text and data mining proposals it put forward last summer.

In total, £1bn of incentives are now earmarked for a dozen low-tax zones to promote regional growth. This harked back to the Johnson administration’s Levelling Up priority and is a watered-down version of the £12bn for 200 sites desired by Liz Truss in the not-too-distant-past. The Treasury suggests the money could be spent on improving skills, specialist business support or local infrastructure.

Beyond regeneration, technology and business support there were a range of announcements designed to benefit specific sectors.

For financial services, the Chancellor emphasised the Government’s desire to encourage pension funds to invest more in shares and to boost the London Stock Exchange, which has lost out on some high profile listings to the United States of late. He also announced subsidies for green industry as a response to the US’ Inflation Reduction Act. In follow-up documentation, the Treasury emphasised the need to ‘lead by example’ by accelerating the transfer of the £364 billion Local Government Pension Scheme assets into pools to support investment in innovative companies and other productive assets (consultation to be expected shortly).

In the health sector, reforms were announced to regulations around medicine and medical technology to allow rapid sign-off from trusted regulators abroad and swift approval service with an extra £10m funding in next two years. Whether these will achieve the aim of speeding up access for the NHS to the very newest drugs remains to be seen. The Chancellor also announced a £400m plan for mental health and musculoskeletal support at work, with consultations for occupational health; £10m for voluntary sector for suicide prevention work; an SEN internship programme; and the abolition of the work capability assessment so that disabled people will not fear losing support by looking for work.

A significant proportion of the changes announced today impact the energy sector and seek to bolster energy security, although the headline extension of the energy price guarantee for the next three months and pre-payment meter charges coming into line with those for direct debits had been well leaked in advance. More surprising for many was the announcement that nuclear will now be classed as environmentally sustainable so investors will have access to the same incentives as are available for renewables. Great British Nuclear is to be established in order to aid the supply chain and bring down costs. Elsewhere in energy, the Chancellor announced the extension of the 5p tax cut per litre for fuel duty for a year; the extension of the Climate Change Agreement scheme for another two years; and a £20bn investment in carbon capture and storage over the next 20 years.

Today’s consumer-facing moves on pensions and childcare seem welcome and substantial. Sluggish growth has dogged the UK economy for many years and hopes of being the next Silicon Valley or bucking the considerable outflow of workers into inactivity remains top of the agenda – but speculative for now.

The last week has seen a flurry of orchestrated – and on the whole well received – government announcements, from the Windsor Framework negotiation, the UK-France summit, the AUKUS defence deal and the Integrated Review as well as today’s Budget. A sign, perhaps, that the Government is seeking to enter a new phase both domestically and overseas, with more confidence about what its governing narrative is and what it wants to achieve; namely that the UK can be a stable, trusted and consistent partner with which you can do business.  Whether they are able to keep it up is another matter!