This article was first published on ConservativeHome on 10 March 2021.
The pandemic has had a significant impact on the British economy. Over 700,000 people have tragically lost their jobs and the economy has shrunk by 10 per cent – the largest fall on record. And the impact could have been far worse had it not been for the Chancellor’s support schemes that have protected jobs and livelihoods throughout, from the furlough scheme to billions paid out in business grants and loans.
Last week’s Budget needed to continue this support for the economy in the short term. But crucially, it also needed to lay the foundations for building the economy of the future. What this country needs – and what Conservatives can wholeheartedly champion – is a robustly pro-growth, pro-enterprise and pro-innovation economy to turbo-charge our exit from the pandemic and help Britain lead the Fourth Industrial Revolution, all while remaining internationally competitive.
Last Wednesday, the Chancellor delivered, with a series of policies that will ensure technology and innovation are at the forefront of our economy. ConservativeHome readers agreed, overwhelmingly backing the Budget with 58 per cent saying it was “good” or “very good” in this site’s latest survey, as did voters polled by YouGov.
Last July, I proposed an IT scrappage & upgrade scheme to equip our promising start-ups, SMEs and scale-ups of tomorrow with better software and technology, in order to enhance productivity which has historically lagged behind our competitors. For years, governments have needed to target the least productive SMEs which have invested insufficiently in the latest software, automation or information technology. And too often, our brilliant small firms don’t have the time or resources to get the extra skills or technology tools they need to be more productive.
That’s why I warmly welcome the Chancellor’s two new Help to Grow schemes, specifically aimed at boosting the productivity of our small businesses. Help to Grow Management will help SMEs get world-class management training through government-funded programmes delivered through British business schools, with businesses contributing just £750 or 10 per cent of the cost of the course.
And Help to Grow Digital will level up the digital skills of our small businesses with vouchers entitling them to 50 per cent off the purchase of new productivity-enhancing software, up to a total of £5,000 each. Both these schemes are exactly what’s needed to tackle the UK’s longstanding productivity challenge, while laying strong foundations for the pro-growth future economy we all want to see.
The Budget went further by delivering other measures which high-growth, innovative companies should welcome. These businesses account for just one per cent of companies in the UK, but generate an amazing 80 per cent of our employment growth.
That’s why consultations to find ways to improve our research and development regime and reform the Enterprise Management Incentive scheme to support growing companies retain talent, are encouraging. Furthermore, ensuring firms have sufficient access to capital is vital, which is why the new Future Fund Breakthrough initiative, successor to the Future Fund, is welcome support for innovative tech businesses to access finance, match-funded by Government.
As the first MP of British-Chinese heritage, I also believe a global outlook and attracting world-class talent to the UK is pivotal to our future economic success. That’s why visa reforms aimed at making it easier for highly-skilled people to come to Britain are especially welcome. These include a new unsponsored points-based visa, and new simplified processes for scale-up founders and entrepreneurs.
These Budget measures to support our businesses and turbocharge our future economic growth build on the Treasury’s other impressive pandemic support schemes, such as extensions to the furlough scheme; temporary VAT cuts and business rates relief; two more self-employment grants; new recovery loans to help businesses access finance; and Restart grants of up to £18,000 for businesses who have been particularly hard hit. Overall, that’s over £400 billion of support this year and next to protect our economy.
I also welcomed the Chancellor’s frankness about the need to begin repairing our public finances. We cannot maintain the current levels of borrowing and debt and expect to be able to respond with another £400 billion when the next crisis hits. And as Conservatives, we believe in sound money and keeping our borrowing under control hence the Chancellor also explained why corporation tax is scheduled to rise for the biggest, most profitable businesses in two years’ time.
The unprecedented ‘Super Deduction’ policy to encourage companies to invest in capital assets such as new machinery – an effective tax cut worth around £25 billion – will also be key to incentivising our SMEs to adopt the latest productivity-enhancing technology. Last year I wrote about the dampening effect on capital expenditure (capex) and investment caused by Coronavirus already being large and destructive. The Bank of England predicted a 26 per cent drop in business investment for 2020. In 2009, as the financial crisis erupted, the fall was 16 per cent by comparison. The Super Deduction can help reverse the damage to our country’s technology base.
What we needed to hear from the Chancellor was a mixture of realism about keeping the economy going now, plus a dose of optimism for the future, by laying the groundwork for British businesses to lead the Fourth Industrial Revolution. We received both, building strong foundations for Britain’s growth and recovery.