Autumn Budget 2021 briefing

Written by

The Chancellor delivered his Budget and Spending Review today, which included some announcements for the North East as part of spending on transport in city regions, from the Levelling Up Fund, the Community Ownership Fund, and an investment from the UK Infrastructure Bank in Teesside. 

The Treasury has summarised these announcements in a set of regional fact sheets here. 

Our initial comment from our policy director Jonathan Walker is here: “The Budget had some welcome announcements for North East businesses but our wait for a long-term levelling up strategy goes on.” 

But how did Rishi Sunak’s announcements compare to the priorities we outlined for the region in our submission to him last month? 

We said that this Budget and Spending Review must… 

  • provide a clear, bold definition of levelling up 
  • fund departments and public bodies in a way that makes them responsible and accountable for levelling up  
  • advance the cause of decentralisation and devolution 

There were a number of announcements in the Budget either made from the Levelling Up Fund or under the wider auspices of ‘levelling up’. These include regeneration projects in Newcastle, Sunderland and Teesside. However, the long-awaited White Paper on levelling up is yet to be published, while other related strategies such as the Integrated Rail Plan have also been much delayed. 

The projects announced today are all extremely welcome and will make a difference to their local communities. However, the fact that they are being awarded from a central funding pot after a national competition speaks to the centralised nature of the country. Without a greater commitment to long-term devolved funding settlements we are unlikely to see much progress in levelling up. 

  • provide support for exporters 

There was a £67.6 million budget increase for the Department for International Trade (DIT) over the Parliament to maintain capacity to secure trade agreements and support exporters.  

An announcement of £180 million to build a UK ‘Single Trade Window’ which aims to reduce the cost of trade by streamlining trader interactions with border agencies.  

Funding for EU-focused Export Support Service from DIT as part of Export Strategy to be published shortly. 

£838 million over three years to 2024-25 to complete delivery of Customs Declaration Service (CDS).  

£107 million next year for the Trader Support Service (TSS) which helps traders move goods to Northern Ireland.  

  • establish the UK Shared Prosperity Fund based on regional economic need 

The first announcement was made from the Shared Prosperity Fund, which will distribute £2.6bn over the next three years, including through the £560m ‘Multiply’ scheme which is aimed at adult numeracy. The Treasury suggests regions such as the North East, where adult numeracy levels are lower, will benefit most from this. 

The schemes so far are national in focus, and don’t reflect the structure of EU funds, which were distributed direct to regions based on need. 

  • deliver on aspirations for broadband investment 

The Government in the Budget confirmed its target to invest £5 billion in to support the rollout of gigabit capable broadband in across the whole of the UK.  

The Government will also provide £180 million over the next three years as part of its £500 million investment in the Shared Rural Network, to deliver 4G mobile coverage to 95% of the UK 

There weren’t any particularly new announcements around broadband but we welcome the Government committing to targets to improve digital connectivity. We now need to see this investment take place to improve connectivity for the region.  

  • properly fund rail investment across the North, including the eastern leg of HS2 

There has been welcome investment confirmed in the Budget for improving local rail links in Teesside including redevelopment schemes for Darlington and Middlesbrough stations. We are still waiting for the Government’s integrated rail plan to set out plans for investment around HS2 and Northern Powerhouse Rail.  

  • ensure the long-term success of regional airports 

We welcome the Government extending the Airport and Ground Operations Support Scheme (AGOSS) for a further six months to help airports as they recover from Covid travel restrictions. 

The Budget also announced a 50% cut in domestic APD and a new ultra-long-haul distance band.  

  • incentivise investment in low-carbon housing and retrofitting 

The Government set out plans to invest £450 million in growing the heat pump market and reduce costs by 25-30% by 2025 to allow the technology to be rolled out across the UK.  

The Government is also providing business rates exemptions and relief in England to support the decarbonisation of non-domestic buildings.  

  • support arts and culture as a means of regenerating communities 

The arts and culture sector will benefit from 50% business rates relief for retail, hospitality and leisure sector businesses, as well as specific Covid recover funding of £52m next year. There is also tax relief for museums, galleries, theatres, orchestras and film and TV projects. 

  • properly fund and support our further and higher education sectors 

Adult skills 

Skills funding will increase by £3.8 billion compared to 2019/20. This funding will quadruple places at skills bootcamps, expand the Level 3 qualifications on offer to adults and fund the newly announced Multiply scheme, which will equip adults with basic numeracy skills. The £560 million investment in the Multiply scheme will benefit the North East disproportionately due to the region’s lower-than-average numeracy levels.  

Schools and colleges 

The Budget outlined a £1.6 billion increase to 16-19 education funding over three years which will help maintain funding rates and expand the rollout of T Levels. Rishi Sunak also outlined a £4.7 billion boost for schools budgets by 2024-2025, amounting to a cash increase per-child of £1500. Also announced was £2.6 billion of funding to be spent on creating new school places for children with special needs and disabilities. Whilst these investments are a step in the right direction, it is unlikely they will counter the record cuts which schools and colleges have faced since 2010.  

The Chancellor also announced additional funding for the schools recovery fund of £1.8 billion, aimed at supporting schools. The total investment of £ 5 billion is still much lower than the £15 billion Sir Kevan Collins, the Government’s former catch up advisor, argued was necessary to support young people to catch up on lost learning.  

Universities 

The Government’s increase in public investment in Research and Development (R&D) to £20 billion will provide a funding increase for the UK’s universities and research institutions of £1.1 billion per year more by 2024-25 compared to 2021-22.  

  • increase funding flexibility to encourage employer investment in training 

There were no significant announcements which would enable this additional flexibility. We considered this an important change to make to enable businesses to engage with a broader range of spending under Apprenticeship Levy rules and adjust how the scheme worked to fit the needs of modern employers. 

  • recognise the damaging economic impact of welfare cuts in our region 

The Budget announced a reduction in the taper rate that applies in Universal Credit from 63% to 55% by 1 December 2021. This is welcome as it will help people working on Universal Credit and keep more money within the region, however those not in work will not feel the benefit.  

  • put in place the necessary business support measures to reduce the impact of future Covid restrictions, including a limited reintroduction of the Job Retention Scheme 

The Government announced business rates relief of 50% for retail, hospitality and leisure sectors in 2022-23. Eligible properties will receive 50% relief, up to a £110,000 per business cap.  

This is positive for businesses in these sectors, however other sectors won’t benefit.  

There was no mention of wider Covid business support packages, or how these might be reintroduced should restrictions return. 

Useful Link

The full Budget document are available here.

Photo by Marcin Nowak on Unsplash

Chamber Says Spending Review A Missed Opportunity

Written by

Jonathan Walker, policy director, North East England Chamber of Commerce said: “The Chancellor’s speech had been billed as the next step in the Government’s ‘levelling up’ agenda at challenging time for our regional economy. While we acknowledge the pressure on public finances, the statement was a missed opportunity to restore confidence and many announcements were poorly targeted and too short-term in their scope.

“On the face of it, a Levelling Up Fund sounds good, but is far too small in scale and ambition to be effective. The Government’s own documents recognise the particular impact Covid has had on northern regions but we fear £4bn won’t go very far if spread across the country. The lack of targeted funding is disappointing at a time when the Chancellor is at pains to stress how little money there is to go around

“Our region needs a long-term commitment to address decades of under-investment, rather than short term fixes which must be delivered during this Parliament.

“In contrast, the reform to the Treasury’s ‘Green Book’ funding rules is something we have long campaigned for and should, if implemented correctly, help to shift the balance of infrastructure spending in the long term.

“Since the Brexit referendum we have constantly asked what will replace EU funding which has been so beneficial to our region over many years. We welcome the reference to the UK Shared Prosperity Fund which will replace it. However as with other elements of this Statement, we lack reassurance it will be effectively targeted, based on regional need, or that it will be delivered swiftly.

“The accompanying Infrastructure Strategy similarly is a missed opportunity to make some big ambitious announcements to address regional imbalances as it contained little in the way of new schemes.

Chamber urges Government to tackle key issues ahead of spending review

Written by

North East England Chamber of Commerce has set out a clear set of demands it wants to see in the Chancellor’s Spending Review on Wednesday, 25 November.

The list covers a range of measures needed to support the region’s business community to recover from Covid challenges as well as specific asks on important issues such as employment and building skills.

Jonathan Walker, Chamber director of policy said: “The Spending Review is an important opportunity for the Chancellor to put into action the commitment to levelling up the country. We are being hard hit on a number of fronts due Covid challenges exacerbating existing problems in our region. There need to be new, substantialinvestment announcements, with clear timescales and delivery routes. Warm words are not enough.”

He stressed the important role the region’s exporters will play if the economy is to bounceback.

Approximately 60% of North East exports are sent into the European Single Market, the highest of all English regions, so the region is disproportionately vulnerable to whatever barriers to trade come from Brexit. To help address business concerns and allow them to adapt to the increased administrative burden expected, there will need to be adequate financial support and guidance.

The Chamber’s view is the current £50m Customs Grants Scheme for upskilling staff, upgrading IT equipment and hiring customs intermediaries is a positive start, but this is set to end in January 2021. With customs declarations expected to increase by 200 million next year, this funding will need to be available for businesses in the medium to long term.

As well as exporters the Chamber want to see support for entrepreneurs, with many people looking for new opportunitiesincluding potentially starting their own business.

The Chamber has long campaigned for more detail on the UK Shared Prosperity Fund to help the region level up. The North Eastnow has the highest unemployment rate, the lowest employment rate and the lowest average hours worked of all British regions. It urges the Chancellor to give clarity on this key investment programme.

Jonathan Walker also highlighted the importance of connectivity. He said: “The transport and aviation sectors have been particularly hit by Covid and the guidance on working from home. We need to ensure that the region retains its connections to help us develop opportunities.Digital connectivity is also increasingly important for businesses so investment in quality digital infrastructure will be essential.

“We need to see the Department for Transport promoting projects that meet the Government’s ‘levelling up agenda’, this must be a central plank of the Government’s investment creating jobs, more resilient networks and investment opportunities.”

Over recent years, Further Education has faced some of the largest cuts in the education sector. In the last decade, per-student funding has fallen by 12% in colleges and 23% in sixth forms, whilst funding into adult education has fallen by 45% in real terms. Successive years of disinvestment in the further education sector has been acutely felt within the North East, with 50% of pupils in the region progressing into an apprenticeship or classroom-based learning post-16 at an FE college compared to 39% in the South East and just 26% in London.

Jonathan Walker said: “Our region’s recovery from the economic fallout of Covid-19 will rely on a well-funded and well-resourced Further Education system which can deliver the widescale retraining and reskilling necessary to help adults into employment, as well as ensure all young people have the skills needed to enter into a much more competitive labour market. Therefore, it is vital Government commits to its pledges to level up the skills system and announces a plan for skills which includes locally led reskilling programmes as well as long-term funding increases for Further Education institutions.”