Jeremy Hunt’s lacklustre Budget could signal a change of government
Having listened to Jeremy’s Hunt’s spring Budget last Wednesday, I jumped on a train and left London.
Keen to know how the Chancellor’s statement had gone down outside the metropolitan media bubble, I headed for South Yorkshire – a region whose coal, iron and steel powered Britain and the world towards the first industrial revolution.
My plan was “destination Doncaster”, where three out of four Parliamentary seats have remained Labour strongholds for decades. But in 2019, the former coal-mining district of Don Valley voted Tory for the first time after an unbroken run of Labour MPs stretching back to 1922.
The Government’s majority is of course built on such Red Wall seats across the North of England and the Midlands.
Millions of “traditional” Labour voters switched to the Conservatives just over three years ago, backing the Prime Minister Boris Johnson to “get Brexit done”.
Now, unless Rishi Sunak’s Tories can hold on to seats like Don Valley at the next election, expected in mid-to-late-2024, we’re in for a change of government. And the impression I got, after countless conversations in Don Valley and the surrounding area, is that Hunt’s Budget statement singularly failed to impress.
Mark Chadwick runs Stadium Garage, a car- and van-repair service just outside Doncaster city centre. As a business owner, employing a team of mechanics, he perhaps should be a natural Conservative voter.
Yet Mark says the Budget was “very disappointing”, with the Tories “coming across as tone deaf”, given the increase in the annual tax-free pension contribution from £40,000 to £60,000 while abolishing the one-million-plus lifetime tax allowance completely.
“There was nothing in this Budget for the working man and woman,” says Mark. “Who can afford to put tens of thousands of pounds each year into a private pension worth more than a million quid? No-one I know.”
While frustrated with Labour’s long-standing stranglehold on local politics in the city of his birth, Mark says Sir Keir Starmer’s party was “dead right” to reject the Government’s move to help already very well-off pensioners.
“Rich people have got plenty of money already – why should they get more tax breaks?” asks Mark. “It’s working people who keep the economy going around here, while the wealthy just go out shopping.”
Local businesswoman Paula Goldthorpe, area manager across South Yorkshire and Humber for the Federation of Small Businesses, was similarly underwhelmed.
Small-and-medium-sized firms account for around half of economic growth in the UK and two-thirds of all employment. As such, Paula’s organisation speaks for tens of thousands of businesses, often family-owned, many of them run by and employing pragmatists who switch between parties depending on what they are offering.
“We’re feeling gloomy after this Budget, which contains very little for small firms,” she says. “We are particularly concerned about companies across the country facing elevated energy bills, including countless manufacturers across this region.”
Over the last six months, the Energy Bill Relief Scheme has given companies financial support with their utility bills, similar to that extended to households. But while Hunt confirmed last week that domestic energy users will keep getting help, with the cap on average annual bills staying at £2,500 for the next three months, support for companies is being curtailed.
From April, only the most energy-intensive businesses, such as steelmakers, will receive assistance. But there are numerous manufacturers across the North and Midlands that still use a great deal of energy but will not qualify for help. They’ll now feel the full weight of costs, which remain sky-high despite falling wholesale energy prices.
Many such businesses may now struggle to survive, having been kept alive by state-support during lockdown. Companies like these are often important local employers.
“This rise in corporation tax is also going to hurt our members – holding back growth and investment,” Paula says. “What the Government has done makes no sense.”
The Budget confirmed corporation tax will rise from 19pc to 25pc, the first increase in this profits tax since the early 1970s. Hunt has presented this move as “fiscally responsible, given the need to strengthen the public finances”.
But countless economists disagree, arguing that this hefty six-percentage-point-rise in the tax rate will result in less overall revenues, given the impact on incentives.
Yes, the Chancellor introduced “full expensing”, allowing companies to offset investment costs against their corporation tax bill. But this replaced a more generous 130pc “super-deduction” – and while the corporation tax rise is permanent, “full expensing” only lasts three years.
It’s also likely large companies – those with deeper pockets, and more able to raise investment finance – will benefit most from the tax breaks, while countless smaller firms will inevitably be hit by the higher headline rate.
Doncaster was within one of twelve “investment zones” announced last Wednesday. These zones aim to create business clusters, focused around universities and research institutions in digital and tech, life sciences, advanced manufacturing, green and creative industries and other “priority sectors”.
Tax incentives will include stamp duty land tax relief, full business rates and first-year capital allowance relief, plus incentives related to structures and buildings allowances and employer national insurance contributions.
But Hunt’s investment zones are a significantly scaled-back version of those announced last year by former Prime Minister Liz Truss – which included planning freedoms and some environmental exemptions. And Hunt’s twelve zones will receive a paltry £80 million of “flexible” government support over five years, part of which will be tax breaks rather than cash.
“The new investment zones are of course welcome,” says Paula. “But, again, they’re more likely to help big businesses, particularly those being incentivised to move into an area, rather than existing small firms.”
Along with business leaders, I met countless ordinary voters during my visit to Doncaster. During an evening at the Parklands Social Club, across dozens of conversations, I heard a lot of praise for Boris, but found few willing to back the Tories again.
Time and again, the subject of Doncaster airport came up, which was closed last November. Having chalked up almost a million and a half passengers during 2019, with countless direct daily flights to the Americas and mainland Europe, the airport wasn’t only a major employer, but a symbol of economic regeneration and hope.
Ministers could do a lot worse than making sure Doncaster airport is reopened, demonstrating the Government’s commitment to “levelling up” and showing Red Wall voters in areas like this why they deserve another chance.
