By Darren Jones
Just over a week ago I wrote how I would pray for George Osborne to produce a budget of growth for the South West — specifically for those areas deepest in the West Country that have been identified as being the hardest hit from public spending cuts, such as Plymouth.
The headline matter is that the Budget of Office Responsibility (OBR) downgraded its growth forecasts from 2.1% to 1.7% this year. This isn’t good news for our region, with it having one of the smallest economies in any of the nine English regions (worth £95.3bn in 2009) and indeed the British Chamber of Commerce considers the growth figures to be too ambitious still.
Government policy is hedged on private sector employment picking up the unemployment figures from public sector job cuts. In areas such as Plymouth — with the three largest employers being the NHS, the university and the Defence sector — this is crucial to families right across that city and indeed carries similar implications for the whole region. Whilst we wait to see if this Governments bet is correct we should be fighting for these areas to get the most efficient resource and support for private sector growth — such as campaigning for Plymouth to become one of the today announced Enterprise Zones — at the same time as continuing the campaign to save our public sector.
Tackling unemployment is particular important to young people in the South West with the region facing youth unemployment rates (for 16-24 year olds) of the highest level in over 24 years. The South West must counteract the so called ‘South West Brain Drain’ and retain young graduates, as well as supporting non-graduates, to ease transition into employment. Whilst the budget today announced increased apprenticeships and work experience places, Nick Pearce from the FT rightly commented that neither of these programmes are as generously funded as Labour’s Future Jobs Fund, which was scrapped by the current Government.
However, there were some positive announcements for people in the South West today, on issues such as Government subsidy for South West water rates (which are the highest in the country). We should wait for the detail as to how this is delivered and to what extent, however, before we get too excited and start filling up the blow-up swimming pool. One can hope the policy delivers on this serious problem, which causes significant financial distress to many in the South West. One should also recognise the extensive work that former MP for Plymouth Sutton & Devonport, Linda Gilroy, did in this area over many years, for without her efforts its inclusion in the budget today would be unlikely.
The decrease in Fuel Duty will also be good news for many in the region — both in urban and rural areas with limited or non-existent public transport and long travel distances — but the 1p decrease should be taken with caution against the 3p VAT rise (which isn’t being altered) and the possibility of significant fluctuations in global oil prices, which the 1p decrease won’t prevent.
But what does this mean to people living their daily lives in Bristol, or Exeter or Truro? One has to remember that people are being bombarded from every angle, with the IFS accusing the treasury of giving a little with one hand and taking a lot with many hands. With 3.3m people in the South West of working age personal taxation will play a crucial element, with reports concluding average households suffering a £600Â decrease in available income each year. The only positive being the £45 per year extra from the increase in personal allowance, which doesn’t come in for another 12 months anyway.
I do have to question who attracts George Osborne’s priorities however. It seems to me that the focus is on private sector growth — which isn’t a bad thing in itself — but at the behest of normal people and the public sector. This is clearly ideological, but just not admitted by the Government. Public sector pension increases, the VAT increase, National Insurance increase for employees, public sector funding cuts and more besides seems almost nonsensical against policies such as the increase in the maximum claim for business Entrepreneurs’ Relief, the temporary status for higher rate tax payers (on incomes over £150, 000) and in the 2% (and not the reported 1%) decrease in Corporation Tax.
I’m sure people would be confused in these decisions — where some get £45 extra next year in personal tax changes but where business people can claim a 10% tax rate on selling their business up to a value of £10m instead of £5m as before. A tax saving of £5m compared to £45 is really rather significant.
It will take many days, and indeed the months and years ahead, to see the detail and the impact of the Budget. It is always an example of political theatre but the take home message, I would argue, is one of private sector support over public sector and people support which falls in line with the dangerous Government bet that the private sector picks up the tens of billions in public sector cuts, arguably being driven too far and too fast, by this Conservative-led Government. I hope the gamble for growth pays off, for if its doesn’t we will all feel the effects.