Budget reflections from Cumbria and a look ahead to COP26

An Autumn budget in which Rishi Sunak delivered his statement at the end of the Comprehensive Spending Review. With more leaks than a rusty radiator a lot of the announcements had been fed to the Press before the announcement in the House of Commons. Most commentators declare that ‘the devil is in the detail” but for once we seemed to get most of the fiscal details up front rather than hidden in the document. Espousing that “The UK economy is entering a “new age of optimism”, Rishi Sunak has now declared a far brighter economic outlook than might have been expected during the hoped for tail of the pandemic providing the Chancellor with that extra fiscal firepower. This is the strategic cash that he needs to help rebuild the economy, and to build back better and for us hopefully in Cumbria, build back greener at the same time. It was an unusual Tory budget speech, the rhetoric of which was last heard during the term of Gordon Brown, of a different political persuasion. But needs must in this post pandemic economic recovery period and so many of the announcements went against the grain of what you might expect a Chancellor to say, and he alluded to that at the end of his speech when he made a plea to the Prime Minister sitting behind him to be allowed to return to type as soon as practicable.

Mr Sunak revealed extra NHS spending, a boost to department budgets for the next three years, pay rises for millions of workers and investment for the levelling up agenda. After another hefty increase to the size of the state, Mr Sunak vowed to cut taxes by the end of this parliament.

Essentially though it was a budget about tax and this list is a summary of what was announced at the autumn Budget:

• Mr Sunak vowed to reduce tax by the end of this parliament as he unveiled a cut to the Universal Credit taper. The taper rate - which cuts state support as people work more hours - will be reduced from 63 per cent to 55 per cent - a boost for low income households worth £2 billion. Mr Sunak claimed it would save almost 2 million families an extra £1,000 per year on average. This comes swiftly on the back of the withdrawal of the temporary uplift of £20 per week which a lot of families have come to depend on
• The Chancellor announced another freeze to fuel duty after petrol prices hit a record high this week, which could be seen as a blow to the UK’s green credentials ahead of the COP 26 summit. Petrol is currently over £1.47 a litre in Cockermouth, which must be higher than nearly anywhere and is also perhaps that there is now only one filling station . What competition does for price! This is about the 12^th year in a row where duty has been frozen.
• A planned increase in alcohol duty will be cancelled. Alcohol taxes have also been simplified, with 15 main duty rates being reduced to six. Stronger alcohol will be taxed more heavily, with red wines, fortified wines or high-strength ciders facing a higher rate. Mr Sunak also unveiled a new "draught relief", a lower rate of duty on draught beer and cider that will cut the price of a pint by 3p. These are always a popular move for the electorate
• Firms in the retail, hospitality and leisure sectors will be able to benefit from another year of business rates relief. They will be able to claim a 50 per cent discount on their bills at up to £100,000, a tax break worth £1.7 billion. This is very welcome in Cumbria at the end of an 18 month period which has had more stops than starts for a season that notionally ends this week for many with the school holidays. He also announced other tweaks to business rates. There will be more frequent revaluations every three years while there will be a relief on investments in green technologies. Devil in the detail time!
• The rate of air passenger duty will be lowered on domestic flights from April 2023. However, there will be a new ultra-long haul in air passenger duty, covering flights of over 5,500 miles. This might look as if it is contradictory to climate change and carbon reduction, but the fact is we need to get commercial movement going again and this will provide a fillip for places like Carlisle Lake District Airport (I should mention my connection here!) which needs to attract domestic airlines. Short term pain alleviated and an active encouragement to develop clean and synthetic fuels potentially using smaller modular reactors that can then show UK as a world leader in reducing carbon, for medium and long-haul flights.
• Mr Sunak announced that the £1 million annual investment allowance was extended from the end of the year to March 2023. The bank surcharge has been slashed to 3 per cent but the overall corporate tax rate faced by the sector will increase from 27 per cent to 28 per cent. He announced changes in the previous budget to corporation tax with the proviso that a new small profits rate would maintain the 19% rate for firms with profits of £50k or less, and a taper (his new favourite word) above £50k.

Overall it was he said a budget that would deliver an economy fit for a new age of optimism. Where the only limit to our potential is the effort we are prepared to put in and the sacrifices we are prepared to make. That is the stronger economy of the future. This wades into the “haves” and “have nots” arena, so in analysing a budget it is very much from your starting position and perspective indicated by where you are on a wealth indicator index.

So we move on to COP 26 where many of these announcements will be old news very quickly. But from a Business Cluster perspective the Chancellor is at last carrying a message that we in the nuclear supply chain can hang on to and hopefully benefit from in the near future. Essentially the Regulated Asset Base model has been finessed to make it far more appealing to investors. This was a sticking point about the development of new nuclear on the Moorside site and also probably in many ways “did for” the Hitachi investment at Wylfa, although there were other factors. Notwithstanding the element of Chinese investment at Sizewell C it now looks as if this will get over the line, and there is hope for a revived and revised project at Wylfa. That will go some, though not all of the way, in addressing the reduction of power production as the AGR fleet comes to end of life, although it would seem that some extensions will be very necessary. As I have mentioned before, siting is not everything for wherever they are deployed we in the Business Cluster represent a comprehensive multi-tiered supply chain that can position itself as a collaboration or individually to win work at every stage of new build, be it site based or a factory build.

We may not hear too much about nuclear at COP and it is fair to say that environmentalists are divided on the subject, but it is undeniable that there is renewed confidence from the right departments, including Treasury, within Government, about it being a necessary part of the mix. In the nuclear sector there is a consistently strong message to Government from ourselves at the Business Cluster that we can’t get to net zero without nuclear and an energy mix that includes both large scale and small modular reactors. Now that the cost of capital is being addressed alongside the considerable capital cost, a route forward that will deliver everything that a low carbon future demands. This can be seen as a legacy from those who got us into the current position, and is perhaps something we can all strive for with a degree of certainty about our capability to carry it through to 2050?