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BUDGET 2013 Overview

Chris Rumfitt Managing Director, Public Affairs

Following the AAA downgrade and the botched 4G auction the Chancellor came to the despatch box in an invidious position, forced to share the news that growth forecasts are down and debt continues to grow. With little room for manoeuvre, big eye-catching initiatives were always likely to be thin on the ground. However, there was the promise of extra money for infrastructure and housing, a cut in corporation tax and populist cuts to fuel and beer duty, all of which were sensibly trailed to avoid being ignored by tomorrow’s headline writers.

Last year’s Budget changed the course of this Parliament, the “omnishambles” from which the Government has yet to recover. Will this one turn the tide back in their direction? Unlikely. Indeed, the political future of this Chancellor, and potentially this Government, may just hang on whether his insistence today that there will be no triple dip recession this year is correct. If he’s proven right, the Conservatives still have a fighting chance in 2015. If not, we could well be heading for another change of Government at the next general election.

Political reaction Rt Hon George Osborne MP Chancellor “This is a budget for people who aspire to work hard and get on. It’s a Budget for people who realise there are no easy answers to problems built up over many years.” Rt Hon Ed Miliband MP Leader of the Opposition “All he offers is more of the same. A more of the same Budget from a downgraded Chancellor. Britain deserves better than this.” Andrew Tyrie MP Treasury Select Committee Chair “The Chancellor has not fundamentally altered the macroeconomic stance in this Budget, the big shift in direction…came from his predecessor.” Andrew Clark @clarkaw Deputy Business Editor of The Times “Budget was good news for a ceramics salesman driving to the pub to meet an estate agent. Or something like that.” Paul Waugh @paulwaugh Editor of “On my reckoning, I calculate an extra £45bn in new borrowing has been announced by Osborne today, from 13/14 to 17/18.”

Budget 2013

The Headlines GROWTH rising to


in 2013/14


in 2014/15


in 2017/18

UK BORROWING falling to

£114bn in 2013/14


in 2014/15


in 2017/18


2.8% 2012

2.8% 2013

falling to

2.4% 2014

DEBT Public Sector Net Debt


in 2013/14

rising to


in 2017/18

Edelman | Southside | 105 Victoria Street | SW1E 6QT London | | 0203 047 2438 | @edelside

Sector Perspectives INFRASTRUCTURE


Jon Mitchell Account Director

With so much of the Budget pre-briefing focusing on infrastructure, one might be forgiven for being underwhelmed by the reality of what was announced in this area. Whilst the further £3 billion ‘switch spend’ from current to capital expenditure and the commitment to publish a long term capital plan in June were good news, the industry is looking to see real progress in the delivery of the schools, roads, rail lines and power stations which the Government has belatedly accepted are urgently needed to kick start the economy. The £100 billionplus of investment required in energy infrastructure is a critical part of this and the sector has welcomed the fulfillment of the Chancellor’s promise on a tax regime for shale gas and progress on CCS. The new Infrastructure Minister, Lord Deighton, recognises that the mismatch between Government intentions and delivery on the ground must end. His attempts to move the National Infrastructure Plan from a list of projects to more of a programme will go some way to addressing these concerns and will be welcomed by contractors and institutional investors, who require confidence and assurance that UK infrastructure investment is worth pursuing. Securing this private sector investment, however, will be the litmus test of whether the Government’s vision is deliverable.



Anthony Marlowe Associate Director

Supporting consumer confidence and reducing the cost of living remain absolutely central to the food and retail sector’s expectations for this Budget. Companies will be pleased to see the Chancellor placing a heavy emphasis on the importance of both, even if the difficult economic environment limits his ability to act as decisively as they might like. With this in mind, the fuel duty freeze and increasing the income tax threshold will be welcomed, as will other measures designed to help families and the elderly. Despite the move to further reduce corporation tax, there will be calls for the Government to do more to support businesses themselves in reducing their own costs. The sector, despite its often positive economic story over recent years, continues to face a number of challenges in delivering sustainable value for money for its customers. Food and retail companies will look to the Government to introduce more substantial policies to support them in this objective, particularly businesses which employ significant numbers of people across sizeable physical footprints.

Budget 2013

BUSINESS & FINANCIAL SERVICES David Robertson Director Osborne’s fourth Budget has seen him continue to focus on at least two of the Government’s stated fiscal themes: attracting foreign investment and targeting tax avoidance, with a passing reference to another – tax simplification, which arguably has been more of an aspiration than a reality to date. The Chancellor’s Autumn Statement had already announced a reduction in corporation tax to 23 per cent from April this year and 21 per cent from April 2014. There had been much lobbying from business groups for a further reduction to 20 per cent from 2015 - one month before the next General Election and it is no surprise that the Chancellor has confirmed this and is thereby creating one of the most competitive corporate tax regimes in the G20. Given the recent media and political focus on tax avoidance, both personal and corporate, it was always likely that more measures would be announced in addition to the draft General Anti-Abuse Rule which will take effect later this year, in order to close some of the loopholes that have been exposed over the past months. Nevertheless, as the Chancellor recognised, truly effective change can only come about through amendments to international agreements.

HOUSING Dominic Pendry Director The Treasury sees house-building, along with infrastructure, as the acceptable face of economic stimulus. Dwindling construction output and an 11 per cent fall in the number of new homes built last year has made the growing political clamour for housing irresistible, even for Treasury officials. At an individual level, the extension of right-to-buy support will undoubtedly prove a vote-winner amongst social housing tenants. House-builders and home-buyers alike will also be pleased by the generous help-to-buy scheme. The housing market will also be bolstered by the introduction of mortgage guarantees and extended support for first time buyers. But there were missed opportunities. The Chancellor appears to have ignored calls from local government leaders for a major relaxation of borrowing rules which could have provided a real step change in construction by housing associations.

Edelman | Southside | 105 Victoria Street | SW1E 6QT London | | 0203 047 2438 | @edelside

Edelman 2013 Budget Briefing