Budgeting on the Margins? Skills, Business Rates and the Budget

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the University of Birmingham

“…There is a major policy tension that needs to be reconciled. On the one hand, there is a strategy to devolve business rates as part of the ‘devolution revolution’. On the other hand, the rise of e-commerce has undermined the basis of much business property-based taxation.”  

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We are not expecting a radical Budget from the new Chancellor of the Exchequer, but rather a Budget that plays at the margins of the nation’s balance sheet. It is important to consider this Budget in relation to decisions that have already been made and announced and that will be implemented in April. It is also important not to forget about the deficit and the level of government borrowings. There is very little money to play with unless the strategy is to raise taxes and/or borrow more. Taxing to spend more government pounds, or borrowing to spend on revenue rather than capital projects, will have all sorts of perverse consequences.

What this Budget requires is a balance between continuing to invest in initiatives that will strengthen the economy, not now, but in the future, and developing a budgetary strategy to support Brexit. The decision that has already been announced to invest an extra £500 million a year in vocational and technical education in England should be welcomed. Our future is not founded in taxation, or even public expenditure, but on the ability of people based in the UK to develop skills or capabilities that will provide the foundations for resilient current and future prosperity. It is not the ‘economy’ or the ‘budget’ that realty matters – nor even public services like the NHS – but the skills and capabilities of those who will enter the labour force and those who are already participating in the labour force. Skills matter above everything else.

Business has been concerned with the imminent change to business rates. There should be no surprise if the Chancellor increases the £3.6 billion transitional relief fund established to assist 140,000 smaller firms. However, there is a major policy tension that needs to be reconciled. On the one hand, there is a strategy to devolve business rates as part of the ‘devolution revolution’. On the other hand, the rise of e-commerce has undermined the basis of much business property-based taxation. A tax on the value of property assets makes limited sense when what should be taxed are profits. One can argue that the business rates are a last-century form of taxation and it is time for a radical reform. Nevertheless, such a reform is not going to be a feature of this Budget – only another sticking plaster or patch will be placed on this problem. 

This Chancellor’s first and last March Budget will not be exciting and will not herald a period of reform. Rather this is about business as usual. It would be welcome if the “Brexit repetitive tick” that exists among the media and politicians could be placed to one side. The debate needs to move on from Brexit and consider the future rather than the past.

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