The fiscally neutral Budget 2014 contained few fireworks. George Osborne’s measures had a distinctly “steady as she goes” feel, possibly leaving room for manoeuvre in his last pre-Election Budget next year. Treasury officials are presenting the package as one for stability. Fiscal rigour has helped lock in low interest rates, and this is starting to repay as growth returns.
The Office for Budget Responsibility now forecasts 2.7% growth for 2014 and 2.2-2.3% in 2015. The rigour is set to continue. Public sector pay increases are capped at 1% for the next two years. There will be additional reductions (above previous targets) of £2bn on departmental expenditures from 2016-17 to 2018-19. And the Chancellor confirmed the introduction of a new cap on welfare spending, trailed in the 2013 spending review.
Fiscal pressure on services will last at least for the remainder of the decade. It will stretch their efficiency, effectiveness and innovativeness to the limit. Policy-makers and administrators will need the sort of first class advisory and delivery support MCA members can provide, but their very lack of resources will create affordability challenges. These challenges will necessitate further examination of the sorts of “risk and reward” options that our members are always happy to explore.
In keeping with recent practice, some Budget measures, such as the rise in personal allowances to £10,500 and the plan to build Ebbsfleet Garden City, had been trailed. Some existing initiatives have been extended and supplemented by modest new measures. The Help to Buy: equity loan scheme, for example, which helps people purchase new-build houses, has been extended to 2020, and supplemented by a £500m Builders Finance Fund to provide loans for SME housing developers.
And there were some surprises. Most eye-catching was the reform of pension finance, with the abolition of the requirement to buy an annuity. There may be opportunities for our members to help reform the relevant regulatory regime and support the financial services industry in devising suitable new investment products. £42m will be spent over 5 years to fund a new Alan Turing Institute, specialising in research into the economic and service potential of Big Data analytics – of great interest to many of our firms, who are at the leading edge of the Digital Revolution. The announcement of approval for a £270m guarantees to support the Mersey Gateway Bridge, by contrast, was expected. It continues the Government’s welcome focus on infrastructure (though the Coalition’s ambitions fall well short of the measures suggested by our MCA experts in the Think Tank report Building Blocks: How Britain Can Get Infrastructure Right.
Some commentators have welcomed the unspectacular and “sound” quality of the Budget, with its emphasis on stability and helping savers – especially when compared with the “Omnishambles” of two years ago. But others see this as a rather dull affair, even a missed opportunity.
We would be interested to know what you think. MCA members have unique insight into what is going on in industry boardrooms, on the shop floor and in public services. Consulting firms are one of the major engines of recovery. Our members are growing by helping other firms to grow. What measures would you want to see in an MCA Budget for Growth? Please send your thoughts to the MCA Think Tank Director Paul Connolly, at paul.connolly@mca.org.uk.