Onward Bulletin 02.03.2021
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IN THE NEWS
Onward’s new paper, Levelling Up Innovation was featured in the Mirror, Politico and LBC. Will Tanner and Will Holloway wrote for The Yorkshire Post and Times Red Box respectively.
Onward’s Advisory Board member, Rupert Harrison, appeared on BBC Radio 4’s Today Programme to discuss the choices facing the Chancellor at the Budget. Read or watch to Onward’s pre-Budget briefing with Rupert here.
The Levelling Up Taskforce, which Onward convenes, was cited in Camilla Cavendish’s pre-Budget column on levelling up in the Financial Times.
Onward’s proposal of a Community Ownership Fund was trailed in the Local Government Chronicle, ahead of a possible announcement in the Budget on Wednesday.
DEFENDING THE UNION: On Monday 8th March we are hosting a major speech by Douglas Ross MP, Leader of the Scottish Conservative Party. You can attend via Zoom and join in the Q&A by signing up here.
FUTURE OF FINTECH: We are delighted to be hosting Ron Kalifa OBE, Chair of the Treasury’s Fintech Review, and Charlotte Crosswell, from UK Finance, on Thursday 11th March for a discussion on the future of UK FinTech. Register here.
We are beginning to see the rough shape of Rishi Sunak's second Budget this week.
In the immediate term, he will offer generous but explicitly temporary help to bridge families and businesses from lockdown to a reopened - and hopefully rebounding - economy. This will likely include extensions to furlough, stamp duty and business rates holidays, and the universal credit uplift to prevent long-term economic scarring, cumulatively adding tens of billions to the £300 billion of pandemic support provided over the past year.
In the medium term, he will announce a range of schemes designed to stimulate the unlocking economy, including flexible apprenticeships, £5 billion in reopening grants and £22 billion in capital to endow the new National Infrastructure Bank.
In the longer term, the Chancellor has already made clear his intention to "level with the British people" about the extreme risks of excessive public debt in a volatile interest rate environment. He will say that taxes will have to rise to secure the public finances.
This is without doubt the trickiest of balancing acts for a Chancellor. He must convincingly marry munificence today with parsimony tomorrow. He will need to taper inducements to stay at home into incentives to go to work, and do so smoothly to avoid a jolt that could leave millions out of work. And he must time his interventions not to the well-studied rhythm of market dynamics but to the unknowable transmission of a mutating virus. He will be grateful, at least, for the vaccine success and the vaccinophilia of the British people. His French and German counterparts are not so fortunate.
What we do not know - yet - is what kind of economy the Chancellor wants Britain to become after the pandemic. That will be unveiled at the despatch box on Wednesday.
It may defy his critics. He has faced accusations that corporation tax rises would be anti-investment, for example, but if they were accompanied by much higher capital allowances (as Onward has recommended) he could actually sharpen investment incentives for capital-intensive manufacturing firms, which tend to be more populous in less productive regions. Similarly, freezing personal allowances and lifetime pension allowances have been decried as a stealth tax, but would signal his commitment to a broad tax base built around a principle of contribution eroded in recent years.
The continuation of the Future Fund and new legislation to establish ARIA, the new science funding agency, suggest that the Chancellor sees a future for Britain as an R&D-intensive knowledge economy, and that he is willing to use active industrial policy to achieve it. He is right to want to build on Britain's considerable research strengths. But as Onward showed last week the UK's geography of innovation is highly concentrated. He should announce that the uplift in public R&D spending will be used to level up innovation clusters outside the Golden Triangle, or risk exacerbating the UK's regional divides.
This is likely to be a watershed Budget - the moment where the recovery starts to take shape and the dividing lines at the next election begin to be drawn. The Chancellor should set out to show not just his willingness to "do whatever it takes" for current taxpayers during an emergency, but his willingness to "do whatever it takes" to support future taxpayers and less well-off places in times of growth. That would show not just fiscal discipline but the pragmatism and absence of dogmatic ideology that voters demand.
Policy Bites
The Khalifa Review has encouraged the Government to relax rules on stock listing and visa requirements to remove obstacles to growth. Link.
Ahead of COP26, the UK is expected to announce the world’s first sovereign green savings bond in this week’s Budget. Link.
The UK has announced its plans for ARIA, the new high risk, high reward science agency. Link.
Quick Links
Reunion. For the first time in 22 successive polls, a majority of people in Scotland back remaining in the UK. Link.
Tax and grow. Philip Aldrick considers the possibility of raising taxes without fiscal tightening. Link.
Vaccine economy. Rapid vaccine rollout promises faster economic revival and fewer tax rises. Link.
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