This morning Chancellor Kwasi Kwarteng set out up to £100bn of spending commitments in what the government is calling “The Growth Plan”.
Semantics aside this is the scope and size of a major governmental budget and with consequences which will be far reaching. To put in perspective the sheer size of today’s announcements the IfS believe this to be the single biggest announcements of tax cuts since 1972.
It’s worth starting off by saying this is a plan of full-blooded conservatism. The greatest hits have been rolled out with deregulation, low-tax zones, and tax cuts. The most significant announcements include the abolition of the top rate of tax, cutting the basic rate of tax to 19 per cent, a reverse in the mooted national insurance rises, a cut in stamp duty, the cancellation of the planned increase in corporation tax, removing the cap on bankers bonuses, and the introduction of up to forty low investment zones across the country.
It is nothing less than an enormous gamble that cutting taxes, primarily for the very richest in society, will spur economic activity more broadly. If it doesn’t improve growth the deficit will explode with little fiscal wiggle room for further public spending.
Universities generally should be concerned about the distributional impacts of this budget. The ability to support students from the lowest income backgrounds into education is not simply the sum total of school visits, outreach, or partnerships. It’s the cumulative impact of economic and social policy which in this instance, unless wealth trickles down as it has not ever yet done, will do little to improve the life chances of those facing grinding poverty this winter.
The already announced energy package will bring some temporary respite for households and university estates. There are also some wider financial reforms which could be of consequence. The plan promises draft regulations on pensions which will allow greater investment in businesses geared toward science and technology. There is also the announcement of the Long-Term Investment for Technology and Science (LIFTS) competition, which releases up half a billion pounds to support new funds which lever in support from pension schemes toward innovative activity. More details will follow.
Like Freeports, Investment Zones will present some opportunities for universities. It’s not clear whether a university already based in an investment zone would benefit from the lower taxes, planning freedoms, business rate reliefs, and national insurance contribution relief, set out in the plans. Enterprise zones, a precursor to investment zones, have a mixed record and work best where there is significant accompanying infrastructure investment. Perhaps, this could be an opportunity to rapidly expand high quality lab capacity of which we know the UK is terminally short.
In all, it is a mini-budget of incredible scale and significance the consequences of which could dramatically impact the way universities recruit, build, and employ.