There were no flags, no whistles and certainly no vuvuzelas at what turned out to be the second most important national event of the week – the Budget. Even if they were allowed in the public gallery of the House of Commons – I don’t think anyone really felt like celebrating. George Osborne termed it the “unavoidable budget” and we should be in no doubt that everyone will suffer. Over the last few weeks, Cameron and Osborne have skilfully talked up the size of the debt. Nick Clegg has also been out and about talking about the need for tough decision on public sector pay and pensions. There does seem to be a level of consensus about the need for radical action to deal with the public finances.
Perhaps he has just parted his hair differently but at Dispatch Box for his first Budget the Shadow Chancellor who was criticised for being too young and inexperienced seems to have grown a little in stature and gravitas over the last few weeks. Government seems to be good for George Osborne.
Overall, Intellect has welcomed the Chancellor’s commitment to the ideas in the Dyson Report. That was the report that the Tories commissioned James Dyson to write before the election, which put forward some strong ideas on how to foster innovation in the UK including focussing R&D tax credits on high tech businesses. There will be a further consultation on this later in the year so it is an issue that we will still need to keep pushing.
On capital allowances and, though the Chancellor announced a small reduction in the rates for capital allowances. Whilst this was better than many had expected, monitoring the situation to make sure that this does not penalise companies, like telecoms businesses, that are heavy investors in infrastructure and small and medium sized businesses that buy technology as capital expenditure.

The announcements on capital gains tax which extend the 10 per cent capital gains tax rate for entrepreneurs to the first £5m of lifetime gains may be good news for technology entrepreneurs but the higher rate could also deter investment in technology companies.

However, it is in the Public Sector that trepidation abounds. The announcement of a further £17 billion of savings, on top of what has already been announced, from departmental spending will undoubtedly be tough to meet. Once again, we have a top line figure and a little detail about exactly where the axe will fall. It simply isn’t true that the government’s belt tightening has started to bite, that will come with the Spending Review in October. Deputy Leader of the Liberal Democrats, Simon Hughes had already hinted that he is prepared to amend the budget. It is not at all clear whether he has the support of other Lib Dem backbenchers. Depending on whether Hughes is serious or just posturing, there could be serious trouble ahead for the Coalition Government in the autumn.

Technorati Tags: government; coalition; budget

Or very nearly at least. Approximately a month after taking office the coalition government is now carefully laying out their plans to cut public spending. David Cameron gave a speech earlier this week in which he hinted that the reality of the nation’s finances were even worse than he had asserted in opposition. It follows the announcement by George Osborne and David Laws of £6 billion of savings in government spending and ahead of the hotly anticipated emergency budget, Cameron’s speech was pitched to place a renewed urgency on action to cut the deficit. However, perhaps the most important function of the speech was to make an appeal to the public to accept the measures to cut spending as inevitable. For those of you that don’t have time to pour over the prime minister’s every word the predictable key messages were as follows:

- we’ve inherited a mess, and a big one
- we’ll have to make tough decisions – we understand they won’t be universally popular
- cutting spending is in the national interest and we all need to take action now.

It is hard not to read an extra ‘please don’t hate us’ plea into the speech. Cameron gave very little detail of what would actually be cut but he did mention big areas of spending like pay and pensions and benefits. Turning this into a national debate will be key to how the successfully the coalition manages to stick to its spending plans. Cameron also knows carrying the public along with him will be a tall order once those measures start to affect individuals.

In quick succession and with the budget date looming, the treasury has outlined a tight timetable for the secretaries of state to submit plans on how they intend to meet ‘a tough new set of criteria to deliver value for money.’ But they have also announced that they will embark on a period of external engagement between the government, the private sector, the general public, voluntary and charitable organisations and experts, in order to obtain the best ideas from those most involved in and affected by public services. It could be described as crowd sourcing the budget but how sensitively this process is carried out will be critical to formalising that ‘national debate.’ Much has been made of discussions between the prime minister and his Canadian counterpart who also embarked on some strict deficit cutting measures. The Canadians famously blew up an entire hospital as a symbol of their commitment to reduce public spending. Even with a comprehensive national debate, I would be very surprised if the coalition or indeed the general public in the UK have the stomach for such high profile gesture politics.

The next edition of Whitehall Watch will cover all the key announcements from the budget.

Technorati Tags: government coalition David Cameron speech finance George Osborne David Laws