The UK chancellor of the exchequer, Philip Hammond, has delivered a budget which offered help to first-time home buyers and the prospect of more money for workers in the National Health Service, but his speech was partly overshadowed by sharp cuts to GDP growth forecasts from the Office of Budget Responsibility.
Our team of academics deliver their verdict on the measures introduced and opportunities missed.
Chris Jones, reader in economics, Aston University
Regardless of the size of the deficit and the economic effects of Brexit, the UK’s fundamental economic problem is productivity growth. Output per worker has been stagnant and there is a concern, as highlighted by the OBR’s forecasts, that the UK’s productive capacity has been severely damaged.
Until productivity rises, wages will remain stagnant. Although employment has been robust there is still significant underemployment built into the labour market. The government needs to create an environment that encourages businesses to invest. One way of doing this would be to create a public investment bank or a sovereign wealth fund to take advantage of the historically low borrowing costs available in the financial markets.
The OBR predicts that trend growth is now around 1.5%, much lower than the historic trend of around 2%. This lower projection suggests that the UK’s productive capacity has been permanently dented after the financial crisis, the impact of austerity and uncertainty related to Brexit.
The Conservatives have done fairly well on tax avoidance in recent years. The decision to deduct UK income tax from royalty payments by high tech companies is also a good move. However, given the impact of the Paradise Papers there was nothing on public country-by-country reporting which would generate much greater transparency as to where multinational firms locate their income.
Jill Rubery, professor of comparative employment systems, University of Manchester
Universal Credit is a disaster waiting to happen. It introduces quite draconian cuts to some of the most vulnerable groups – the disabled and single parents in particular. It also provides employers with new opportunities to pass the costs of flexibility on to their workforce in the hope that the state will pick up the pieces.
It no longer provides the incentives to work promised when it was committed to. Changes in this budget to the implementation are welcome as they will reduce the catastrophe of the most vulnerable having no access to funds and at risk of losing their flats or houses even if they stop eating.
But the shambles of Universal Credit is evident in the fact that the measures to allow for advances and continuity of benefits is to cost £1.5 billion. It is not clear why these basic rights were not built into the initial plan unless it is evidence of neglect of the needs of benefit claimants. The plan seems to be to prevent the system itself attracting criticism, probably in the hope that the general public will not care so much about the cuts being introduced or the flexibility provided for employers to offer whatever hours they wish.
Geoff Rodgers, deputy vice chancellor (research and innovation), Brunel University London
The additional £2.3 billion in research and development funding announced in today’s budget is very welcome and much needed. It will allow universities to build new research programmes in collaboration with industry that identify, characterise and implement the disruptive technologies necessary to drive change in the autonomous vehicle, mobile communication and artificial intelligence technology sectors, which should all now see a significant boost in funding.
These are areas where both UK industry and UK academic research is strong, and therefore the country is well equipped to compete globally. The combination of research and development in advanced technologies within these sectors, coupled with a good supply of talented young people entering these industries, will help drive improvements in productivity and promote economic growth within the UK.
More to follow …
Chris Jones has received funding from the British Academy.
Geoff J Rodgers receives funding from HEFCE, RCUK and the EU. He is a Governor of both Brunel University London and Heathrow Aviation Engineering UTC.
Jill Rubery has received funding from from a wide range of sources including the European Commission, the ESRC, the Department of Health and the International Labour Organisation She is an active member of the Manchester Fairness At Work Research Centre at the University of Manchester.