The budget of last week, the first ever delivered by a female Chancellor and the first in 14 years from a Labour Government was certainly one of massive change. On one side, a huge £40bn p.a. tax-raising agenda; on the other, a rebuilding of social and public services at £20bn per annum, plus the £20bn per annum in capital spending guaranteed for the next five years.
Let’s not forget that some £13bn (spread over five years) was set aside to pay compensation to the Hepatitis blood scandal and Horizon scandal victims. All of this enabled by an “approved” upgrade in UK fiscal framework borrowing rules, given the nod by the international banking sector and the Office for Budget Responsibility (OBR). It is hard to argue that these taxes and rebalancing of the public sector will not ultimately fall on the working population, collected of course by UK businesses, affecting business growth or future employee pay.
For the wider UK economy, it creates concern going forward. The bill to pick up these commitments was in the main spread across the nation’s business owners and “those with the broadest shoulders”, with the 1.2% increase in Employer NI contributions providing a tax raise of £25bn p.a. This will undoubtedly impact on employment costs, jobs, salary increases and business investment. On the flip side, the strategic benefit for the UK is an undoubted necessary investment in the unsustainable crumbling infrastructure in public services and the longer-term benefit of growth through necessary industrial, infrastructural and technology capital investment.
“Short term pain for longer term gain” is the cliché used. This underpins the latest budget with the OBR presenting a number of analyses to support a small but continuous growth in GDP in the short- to medium-term. Workers and businesses are seemingly now paying the bill for austerity and decline, and, the new Government has chosen to add primarily to the business tax burden in return for a promise to address the societal issues. This is where divisions about priorities will exist, of course.
For the transport and logistics industry, there was very little-short term benefit outside of a vital fuel duty freeze. Notable commitments were, however, made with the fare cap extensions for bus operators as part of a £1bn extra support package for local operators, and continuing tax benefit extensions on electric vehicles, as well as £200m for improving EV charging infrastructure. An additional £500m (a 50% increase) was promised for roads maintenance.
The Department for Transport budget support was not, however, focussed on short term operating expense benefits outside of retaining these fuel, EV and fare subsidies. Issues such as a lack of financial support for training, apprenticeships, driver facilities, operating costs, zero carbon transition were not a focus. In fact, the £30bn budget for DfT for 2025-26 indicated a flatline approach to spending and in real terms a 2.5% fall in budget. We wait more detail on how the DfT plans to address these ongoing issues and set out its priorities.
Indirectly of benefit, as part of the bigger capital project investments, we should recognise that there are investment programmes in DfT rail infrastructure, DfE clean energy capture and battery production – all of which in theory will have a positive impact on the future of the transport and logistic sector. The investment in rail is the big DfT focus in capital spend.
The further investment in housing construction, schools and hospitals through these priority capital projects will undoubtedly be welcomed as having a direct positive benefit on the haulage, heavy plant equipment and manufacturing sectors, stimulating wider wealth generation. The fit and proper management of these capital projects and the returns they deliver have never been more crucial.
The statement opened as being “a budget for the national interest and should be taken in the round”. Time will tell of course, but in the short term we can expect to see small, medium and large business owners bearing the brunt of the pain. Business jeopardy does exist as the reduced profit impact on businesses can stall company investment and potentially restrict pay increases across the employment sector. The hope is that investment in infrastructure and public services will stimulate contracts, additional jobs and deliver a step back from hitherto sustained austerity where spending had dried up and where sectors and services were in desperate decline.
The “trickle up” effect is what we hope will be delivered over the next five-10 years, banking on huge up front investments paying off in the medium and longer term. Whatever our individual views or politics, let’s hope this massive change does deliver for the benefit of us individually, as business owners and for the wider UK public. As businesses, we must now adjust and change and, as we always do, find the way to adapt to what is a massive tax policy change to correct the accumulated austerity issues across the country.
Willie Paterson
Chief Executive, Asset Alliance Group
