Spring Budget 2021: Key Government Spending Plans

On 3rd March 2021, Chancellor Rishi Sunak delivered the UK Budget in the House of Commons, outlining the Government’s spending plans in the coming months and years.

As the nation prepares to tentatively ease COVID restrictions over the coming months, this budget announcement was one of the most eagerly anticipated for many years. Perhaps the main takeaway for businesses across the UK is the extension of the job retention scheme until the end of September. Mr. Sunak said the scheme would continue to help millions through the challenging months ahead.

Delivering the budget in Parliament Chancellor of the Exchequer Rishi Sunak said:

“This Budget meets the moment with a three-part plan to protect the jobs and livelihoods of the British people.

“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.

“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.

“And, third, in today’s Budget we begin the work of building our future economy.”

COVID-19

Predictably, the initial focus of the budget announcement was around the ongoing support for those areas of the economy worst-hit by the COVID-19 pandemic. As well as the extension to the furlough scheme, the Chancellor also announced an extra £1.65 billion cash injection to ensure the Covid-19 vaccination roll-out in England continues to be a success. Mr. Sunak also announced £28 million to increase the UK’s capacity for vaccine testing, support for clinical trials and improve the UK’s ability to rapidly acquire samples of new variants of COVID-19.

Protecting jobs and livelihoods

As part of Government efforts to support, protect and create jobs, the Chancellor announced increasing support with £126 million of new money to enable 40,000 more traineeships, and doubling the cash incentive to firms who take on an apprentice to a £3,000 payment per hire. Also announced was £7 million for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.

To balance the need to raise revenue with the objective of having an internationally competitive tax system, the rate of Corporation Tax will increase to 25%, which will remain the lowest rate in the G7. In order to support the recovery, the increase will not take effect until 2023. Businesses with profits of £50,000 or less, around 70% of actively trading companies, will continue to be taxed at 19% and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate.

UK Infrastructure Bank

Mr. Sunak announced the formation of a new UK Infrastructure Bank to be based in Leeds. It will see an initial £12 billion in capital, with the aim of funding £40 billion worth of projects. Local Authorities will gain access to £4Bn in loans, which can be tailored for projects around transport, storage and renewable energy. Speaking ahead of the budget announcement, the Chancellor said:

“We are backing this bank with the finance it needs to deliver modern infrastructure fit for the 21st century and create jobs.

“This shows how serious we are about levelling up the country so that everybody can benefit from our future prosperity.”

The Chancellor also reiterated the need for a commitment to green investment, which the Infrastructure Bank will help with.

Environment & Green Energy

He also announced a £20 million to fund UK-wide competition to develop floating offshore wind demonstrators and help support the Government’s aim to generate enough electricity from offshore wind to power every home by 2030.

Mr. Sunak also announced £68 million to fund a UK-wide competition to deliver a first-of-its-kind long-duration energy storage prototypes which will reduce the cost of net zero by storing excess low carbon energy over longer periods.

An investment led recovery

The chancellor also spoke about Freeports, something which he said ‘could only be done now we have left the European Union.’ He announced that eight new English Freeports will be based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside and will be special economic zones with different rules to make it easier and cheaper to do business.

Beginning in April 2021, a new super-deduction will cut companies’ tax bill by 25p for every pound they invest in new equipment meaning they can reduce their taxable profits by 130% of the cost. This is worth £25 billion to companies over the two-year period the super-deduction will be in full effect.

Support for the whole UK

In addition to the announcements which apply to the whole of the UK, this budget also provides an additional £2.4 billion to the devolved administrations in 2021-22 through the Barnett formula.

  • £1.2 billion funding to the Scottish government
  • £740 million funding to the Welsh government
  • £410 million funding to the Northern Ireland Executive

Grahame Steed, BiP Solutions’ Content, Research and Communications Director said:

“Given the experience of the past 12 months, it is encouraging to see continued and increasing investment into public service delivery and particularly areas such as infrastructure and sustainable energy. This, and the exciting changes heralded by the Transforming Public Procurement Green Paper, make it a time of opportunity for all engaged in the public sector supply chain – and we look forward to supporting buyers and suppliers as we navigate our way through this period.”

General Election 2019: The Manifestos

As the political parties’ campaigns for the UK General Election of 12 December continue, here we look at some of the major announcements from the parties’ manifestos, and what they mean for doing business with the public sector. All of the major parties have pledged a rise in public spending, meaning there will be an impact on business opportunities in areas with increased spending.

To learn more about what the parties’ manifesto pledges could mean for the public sector and UK business, how elections affect the number of public sector opportunities, and more about the major sources of opportunity for suppliers as we look ahead to 2020, download the latest edition of our report, ‘The Public Sector Market in 2020 and Beyond: Opportunities for Smart Suppliers to Get Ahead‘ (updated 28.11.2019). This document will continue to be updated with the latest intelligence as the situation develops.

The Conservative Party

The Conservative manifesto’s pledges are costed at an increase of £2.9bn a year by 2022. Alongside the pledge to recruit thousands more nurses for the NHS and more police officers, other policies include a £2bn fund for fixing potholes in roads. The pre-manifesto pledge to allow more borrowing for infrastructure projects has also been confirmed, with capital spend rising from £3.2bn next year to £8bn by the end of the next parliamentary session, including an aim to increase spend to make social housing more energy efficient.

The Labour Party

Labour have costed their manifesto pledges at £82.9bn. Labour have proposed a redefinition of the rules around government borrowing – considering overall ‘public sector net worth’, i.e. the value of the UK’s assets, instead of the national debt – to allow for this increased spend. For public sector workers, Labour have pledged year-on-year above-inflation pay rises, beginning with a 5% increase. Healthcare has come into focus, with the proposal of creating a new ‘National Care Service.’  Energy infrastructure and efficiency are a key area of focus, given the aim for net-zero carbon emissions by the 2030s, managed through a £250bn ‘green transformation fund.’ Labour have also announced intentions to invest in infrastructure more widely, with plans to build 150,000 social homes by the end of parliament, along with a commitment to the HS2 network, including extending it to Scotland.

The Liberal Democrats

The Liberal Democrats have also pledged a rise in public spending, costing their proposals at £63bn. Major announcements include a 1% rise in income tax, aiming to raise £7bn for the NHS and social care. The party have also announced a £130bn investment in public transport infrastructure, including a commitment to HS2, and the building of 300,000 new homes per year by 2024. Of particular interest to smaller businesses is the Liberal Democrats’ plan to replace business rates with a commercial landowner levy, applying to the overall land value of a commercial site rather than a calculation based on the buildings themselves. In addition to the previously announced ‘Skills Wallet’ of £10,000 per person for adult learning and skills training, skills shortages in the defence sector would be tackled by giving graduates in STEM (science, technology, engineering and maths) subjects one-off payments of £10,000 to become Armed Forces engineers.

Other parties

The positions of the UK’s other political parties could become particularly important if no party can form a majority government. Many flagship policies revolve around sustainability and energy efficiency. The Green Party aim to reduce the UK to ‘net zero’ carbon emissions by 2030, based on £100bn of public spending into infrastructure, technology and associated jobs. Plaid Cymru have announced £15bn for a ‘Welsh Green Jobs Revolution’, while The Brexit Party have proposed that the UK no longer export any waste abroad, which would necessitate an investment in waste processing plants and associated jobs.

At the time of writing, the Scottish National Party and the Democratic Unionist Party are yet to publish their manifestos. This post will be updated as the situation develops.

But what about Brexit?

The political parties’ differing stances on the way in which the UK should leave the European Union – if at all – is not only a major policy in itself, but is claimed by several of the parties as the basis of their other spending plans.  The Conservative Party would seek to implement the Withdrawal Agreement that Prime Minister Boris Johnson has previously negotiated with the EU. The party has stated that the terms of a trade deal with the EU will be negotiated in 2020, with the aim that the UK trades outside of the EU single market and any form of customs union. The Conservatives have also stated that there will be no extension to the transition period, during which time the UK remains aligned with EU rules, beyond the end of 2020.

Labour meanwhile have stated they would negotiate a new Withdrawal Agreement with the EU within three months of coming to power, then put this Agreement to a legally binding public referendum, with remaining in the EU as an alternative option. Labour’s Agreement would aim for alignment with the EU single market and a UK-wide customs agreement with the EU. The Liberal Democrats favour revoking Article 50 unilaterally, meaning the UK would remain in the EU under the same terms as previously, which the party claims would provide a £50bn ‘remain bonus.’

Read the updated edition of our latest report, ‘The Public Sector Market in 2020 and Beyond: Opportunities for Smart Suppliers to Get Ahead’, for more detail on how the parties’ election pledges will affect business with the UK public sector. The report also includes detailed data on how elections since 2015 have affected the number of public sector opportunities, the major trends that will shape public procurement in 2020 and beyond, and how smart suppliers can get ahead of their competitors over the coming months. Download your copy here.

BiP Solutions Limited is a company registered in Scotland with Company Number SC086146 and VAT number 383030966 and having its registered office at Medius, 60 Pacific Quay, Glasgow, G51 1DZ.

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