What the Government should consider in the upcoming Spring Statement
The last year was undoubtedly tumultuous; from energy price rises driven through the roof by the horrifying war in Ukraine, the market reaction to the Truss government’s mini-budget or the cost of living crisis affecting every part of our lives.
We cannot underestimate these challenges, for both individuals and businesses, but it’s crucial that we don’t forget the longer-term problems we face. Low productivity, low growth and low investment dog our economy, with this playing into the already acute gap between the North and South. And this is before we consider the all too real challenges of climate change.
So as we enter Spring, and are finally starting to see more stability, we have the opportunity to take stock and think more about the future. And the Government’s Spring Statement gives us the perfect time to collectively consider what the best course of action is now to help the country not only recover but grow and thrive.
First things first
With so many issues needing attention, it’s hard to see where you would start.
First up though must be the cost of living. As has been well-trailed in the media, the Chancellor does have some short-term flexibility in the upcoming Budget given the energy support cost turned out to be less than initially forecast. We believe that this headroom should be used to continue to support families and businesses most exposed to high fuel costs. The Government should look at whether this can be more targeted where it is most needed or to look at ways of helping those who are most vulnerable.
This will be particularly important to supporting the longer-term health of the UK’s small business sector, with many still recovering from the events of the last few years. They need help now to protect them for the future.
But looking more broadly than that, we understand that no single budget or a single person or group could make a lasting difference in isolation. And this is where we can look further ahead.
R&D at the forefront of change
One of the most important areas where the Government needs to support growth is within research and development (R&D). There needs to be scope for the creation of good quality jobs right across the UK.
R&D is too often seen as something that happens in the ivory towers of universities and that it doesn’t make a difference in the real world. But this is not true.
It is the richness of R&D coming out of our universities combined with our businesses that create new products and new innovations - from new personalised medicines to applications for AI that save us energy at home, or lightweight low carbon building materials. We can all see how these could help us personally and as a society. The application of innovation within businesses and the potential to scale this quickly also has the power to transform city economies.
Ultimately, it means more resilient businesses that are fit for the long-term.
Many people were disappointed to see The Treasury recently withdraw £1.6bn of funding previously allocated to support a domestic alternative to the Horizon Europe research programme, although the PM’s new Windsor Framework has renewed hope that Britain will be readmitted. In the meantime, many will be watching the Budget to see if this funding is repackaged to the benefit of the sector and the innovative businesses within it - many of whom are still struggling to come to terms with the impact of unfavourable changes made to the UK’s R&D tax credit schemes in the Autumn Statement.
In the Spring Statement, we would like to see a continued commitment to science funding and the commitment to rebalance it across the country, a readmission to the Horizon Europe research programme and increased support for private sector organisations to innovate including through new style investment zones focused around Universities.
Creating places for innovation to thrive
But improving resilience across the sector cannot be done without a ‘place’ perspective as well. In places: people come together, generate ideas, build on key strengths and create more productive clusters.
For this reason, we hope to see a firm commitment in the Spring Statement to the creation of Investment Zones, focused on locally determined clusters connected to University strengths and supporting regeneration in the areas that need it most. Well targeted, locally led and with appropriate government support these have the potential to create thousands of new jobs and business opportunities.
Power to the people
There is a definite need – and appetite – for more radical devolution of decision-making power to places. There are too many decisions made in Whitehall that are divorced from local impact.
This doesn’t mean that central Government has no role to play in decisions or spending, but rather recognising that all centres of power need to be playing the right roles.
We know that power and accountability for local decisions on investment have a far greater impact for the future of places. And this isn’t about making concessions to places, allowing them simply to be involved in decision making, but transferring responsibility and accountability to local mayors and city regions.
At the same time, we believe that the Government should focus on investing in things only the Government can invest in. For example, a focus on transport infrastructure across the country, but particularly in the North, would be welcomed to help open up opportunities for communities and businesses across the UK.
We would also hope that the Government will be considering improving our energy networks to support the UK’s transition to net zero and give us cost and supply security in future.
Many businesses will be reassured by this relative stability that we are experiencing. It is now time to use this as an opportunity for us all – the Government particularly – to get serious about how we create a country that is fit for the future; economically, socially and environmentally.
We have so much untapped potential and opportunity for growth, so we hope that the Government will use this moment to help propel us into a thriving future.