On Wednesday, Jeremy Hunt stood up in the House of Commons to give his first budget as Chancellor of the Exchequer. Following the events of last September’s mini-budget under the premiership of Liz Truss, there was little chance of any radicalism within his statement to MPs.
With the Prime Minister looking to show that the Conservatives are a safe pair of hands on the economy, most of the measures proposed not only assured the markets but reflected the more sober grown-up politics that has been at the core of the Sunak premiership. That is not to say that the budget did not bring forward new proposals that could have a significant effect on the state of the UK economy in the future.
While the headlines were about the improvements in childcare and changes to pension rules to bring more people back into the workplace, the measures with the potential to change the future of the UK economy were largely hidden in the small print. One of the positive highlights was the commitment to support growth in the sectors of the future. Whether this is another rehashed industrial strategy in all but name will be up to others to debate.
However, it was heartening to see a clear statement of intent to provide real and tangible support for advanced manufacturing, the creative industries, digital technologies, green industries, and life sciences. In particular, the admittance that the UK needs to invest more in research and innovation infrastructure, especially in improving computing capability to maximise opportunities in artificial intelligence and boost critical areas such as health and climate change, is long overdue.
The commitment to investing £2.5 billion over the next decade into quantum technologies will also ensure that the UK develops a world class capability in one of the most important emerging sciences that has the capability to transform entire industries.
Whilst levelling-up remains a key part of the Government’s drive to spread economic prosperity to every part of the UK, it can be argued that much of the spending to date has been very much hit and miss, with no clear strategy as to how these funds will impact on improving productivity across the nation.
It could be argued that some of the measures announced in the budget will go some way to address this critique and ensure that boosting innovation and skills outside of London will lead to more productive local economies.
With a nod to Michael Heseltine’s regional development strategy of the 1980s, the headline announcement was that of the launch of a refocused Investment Zones programme to catalyse twelve high-potential knowledge-intensive growth clusters across the UK, each of which will drive the development of the five key industries discussed earlier.
This development is long overdue in not only promoting innovation at a local level but in ensuring that the specific sectoral strengths of different parts of the UK contribute to the overall economy. While the links with the higher education sector are crucial, it is also critically important that the investment zones also maximise the opportunities for those high growth firms that are scaling up locally and have the greatest potential for creating jobs and prosperity.
Eight of these investment zones will be based in the North of England or the Midlands with four being reserved for the devolved nations.
For once, it would be good to see the Welsh Government fully engaging in a UK Government funding process and fighting hard to ensure that two of these zones come here to Wales rather, as would be expected, leaving them to go to Scotland. There is certainly a strong case for a range of clusters including advanced manufacturing in Flintshire, creative industries in Cardiff and green industries in Anglesey or West Wales. By working closely with the four city and growth deals across Wales, there could be a real opportunity to maximise the potential from this funding.
Perhaps the biggest change in terms of levelling-up was the announcement that economic development would be devolved down to local authorities in England.
As the budget rightly notes, empowered, accountable local leaders are best placed to take the decisions needed to foster local wealth creation and civic entrepreneurialism.
This measure, more than any other, will be the one that makes the difference in closing the prosperity gap between London and the rest of the nation and will do so by boosting the capability of different parts of the UK without necessarily affecting the economic potential of the capital city.
Whilst London may not be affected, there may be unintended consequences for the devolved nations, especially for Wales given its porous borders with England. Many of the powers that are about to be handed to English local authorities have been available to the Welsh Government since 1999 along with billions of pounds of European funding that many other poorer parts of the UK, such as the North east of England, did not have access to.
Some would argue that Wales has not taken full advantage of the devolution dividend during the last twenty-four years. However, that is a moot point when areas such as Greater Manchester and the West of England will now be able to compete on a more level playing field with Wales and develop their own specific economic strategies to attract investment as well as boosting entrepreneurship and innovation.
And whilst not attracting the headlines over the last few days, this proposal to support further devolution across the UK could potentially pose the greatest danger to the Welsh economy in the future unless the Welsh Government takes economic development far more seriously than it has in the last few years.
