Newcastle University: Responding to the Budget, our experts give their views on some of the measures announced.

Against the backdrop of the COVID-19 and ongoing Brexit crises, Chancellor Rishi Sunak’s second budget has been one of continuing to spend today, but with the warning of ‘tough decisions’, and with many commentators predicting increased taxes and/or spending cuts alongside inflation, to come in future. Support for various COVID-19 measures such as Furlough have been pushed further down the road, to at least September for many of them. There are four points of political context worth remembering while poring over the detail of Sunak’s speech. Firstly, the difficulty of exiting from COVID-19 support measures when much of the economy is being supported by them. Secondly, the tension between the promised ‘levelling-up’ agenda from 2019 and support for new ‘Red Wall’ Conservative voters, and maintaining support in the Conservative Party, which is ideologically more oriented towards cuts than spending. Thirdly, Sunak’s ongoing positioning for leadership of the Conservative Party when Boris Johnson stands down. Fourthly, the forthcoming sub-national elections in May 2021, which will be the first, and overdue, electoral test of the Johnson government.

The emphasis on the economy and the claim that there will be no income tax, national insurance or VAT rises will suffice in the interim to keep a section of the Conservative Party happy, even if there may be grumbling about longer term rises in Corporation Tax. An infrastructure bank for Leeds, port infrastructure and a Freeport in Teesside, and a new economic campus with the Treasury and other economic departments relocating some capacity and jobs to Darlington, indicates that ‘Red Wall’ arguments are also being heard. Local politics has clearly mattered. The Conservative Tees Valley Mayor Ben Houchen was mentioned, and the area spoken about at length, arguably more than any other area in the budget. It is, of course, entirely co-incidental that the Tees Valley Mayoral position is up for election in May 2021.

Support for high streets, communities and levelling-up may be welcome, but the answer in resolving these issues is not more pots of centrally-held money which can be applied for, but in more meaningful devolution and ability to raise money locally without central control. This was not addressed, although the speech contained a major hint about the UK government’s view of devolution. Sunak’s speech contained a direct attack on Scottish and Welsh devolution in proposing to spend directly in both countries. Scottish and Welsh governments, already at loggerheads with the Johnson government on Brexit, will no doubt respond forcefully. More broadly, Labour will also find it difficult to challenge a Conservative Party which, enabled by the pandemic and its so-called ‘levelling-up’ agenda, has shape-shifted to become a party of public spending, robbing Labour of a key argument. In the meantime, as with most things this Conservative government has touched, the can of dealing with the COVID-19 finances has been politically kicked down the road, while major pressing issues such as health and social care barely merited a mention.

The retail sector has been clearly affected by changes of lifestyle brought by COVID, as research we recently carried out shows. The idea of announcing support for the high-street is important, because physical stores are those that have been affected the most as a result of the coronavirus pandemic.

However the government has opted for a differential treatment for High Streets compared to other segments, who may not have needed the same level of support. But does the support announced today, of £5bn to help High Streets reopen, go far enough? The figure seems on the low side, as we estimated losses of £40bn for each non-food and restaurant businesses. At the same time, it does not seem to differentiate much within the high-street where large and small stores can co-exist, and it is not clear if stores who are not on the High Street, but which have had to close due to COVID, are eligible.

A key question is also whether stores will be able to remain open if habits – both in terms of purchasing habits and the frequency of going to the office – have shifted in the long-run. If shopping online stays, and people spend less time in their office in city centres, the money spent for reopening may not be conducive to long-term growth in the sense that the government expects. Retail in high streets is still heavily dependent on physical footfall, and a lot of the success of this monetary support will depend on the ability to have people return in the high streets in sufficiently large numbers.

It would have been more appropriate under the circumstances to provide grants to allow these businesses to diversify their retail, whether that is selling more online or adopting new forms of retail such as food box delivery schemes.

Rural small businesses need a joined-up approach to supporting the digital transformation
Dr Paul Cowie, Research Fellow, National Innovation Centre for Rural Enterprise

The COVID-19 pandemic has highlighted the vital role digital connectivity plays in every aspect of people’s lives. Consequently, a lack of high-quality digital connectivity in rural communities is having a significant impact on those communities.

The ‘Help to Grow – Digital’ is all very well but is dependent on small businesses having the necessary digital connectivity to begin with.

The roll-out of super-fast broadband to all rural areas continues to substantially lag the roll-out in urban areas. The additional money for rural broadband outlined in the budget is not a complete solution. The way the roll-out is managed and procured needs to be reconsidered. Setting a percentage coverage target means marginal rural areas face astronomical costs to connect. A place-based approach is needed for what is now a public service. Openreach’s Community Fibre Partnership scheme is a start but more funding for alternative providers (i.e. community and not-for-profit broadband initiatives) is needed.

Rural super-fast broadband is only half the battle when it comes to digital connectivity in the future. Technology such as 5G is fundamental to many next-generation technologies such as autonomous vehicles, digital health and education services and robotics.

Whilst initiatives such as Shared Rural Network for 4G is a welcome start, a more joined-up strategy and more financial support is needed to deploy these technologies in rural areas. In particular, there is a need to lay the foundations of a shared rural 5G network.

There also needs to be a joined-up approach to supporting the digital transition for rural small businesses – one that covers digital connectivity, digitally-enabled business premises and skills and training. Doing each of these in isolation risks wasting resources.

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