Budget 2013 – What’s in it for industry?
So Budget 2013 has been delivered. How should industry react? In my view, one cheer, perhaps one-and-a-half, would be the order of the day.
In fact, the Government’s decision to stage certain Budget-related announcements in advance means there was not too much for industry in today’s statement that we didn’t already know. The two key announcements – the new Aerospace Technology Institute, announced by Deputy Prime Minister Nick Clegg, and the Government’s acceptance of most (but not quite all) of Michael Heseltine’s recommendations from his ‘No Stone Unturned’ report – both came on Monday.
The Aerospace Technology Institute (ATI) is a £2bn investment – provided 50:50 by government and industry – over seven years to support the aerospace industrial strategy. The ATI will allow industry and academics to develop technology for the next generation of quieter, more energy efficient aircraft. The Government believes it will secure up to 115,000 high value jobs in aerospace and its supply chain in the long-term. It is clearly good news and the TUC warmly welcomes it. The ATI comes alongside an additional £500m of funding for other key sectors where the UK has a comparative global avantage, such as agricultural techology and automotive.
The headline response to the Heseltine Review that has been announced is the creation of a single local growth fund, devolved through new Local Growth Deals. Funding will be allocated to LEPs on the basis of strategic multi-year plans for local growth. Those LEPs which leverage more local and private funding and commit to governance reform will be more likely to benefit in terms of funding. The Single Local Growth Fund will be operational by April 2015.
Again, the TUC supports this move, even if it undermines the logic of the Government having abolished the RDAs in the first place. The key issue is to ensure that LEPs are well-enough established to take advantage of this devolution of responsibility over the next two years. Trade unions were represented on RDAs and it is essential that a workforce voice is present on the LEPs. Lord Heseltine himself argued this point in his report, when he said: “What is missing [from LEPs] is the experience of those from the shopfloor of industry”.
The Government has adopted 81 of Lord Heseltine’s 89 recommendations, in full or in part. Among the eight that have not been accepted, the Government will not, any time soon, be clarifying the future of airport capacity in the South East of England, which is a shame, if not a surprise. I will be particularly interested to see how it interprets Heseltine’s call for a National Growth Strategy, with targets against which achievements can be measured. This is key, since we talk about growth and about economic rebalancing, without any sense of what constitutes success. Industry bodies, notably the EEF, support this approach and it is crucial that this commitment is delivered.
The other major Budget development, also announced in advance, is that the Government has committed to increase capital investment plans from 2015-16. Yesterday, newspapers reported a £2.5bn a year increase from then (the Budget actually said £3bn a year), to be funded by reductions in current spending. The TUC responded that this would increase growth by a measly amount and it was being funded in such a way that would further undermine public services. At a time when interest rates are negative in real terms, there is a fantastic opportunity to make serious investments in infrastructure – an opportunity that is being lost.
So there was some good news for industry today, but if we are serious about an industrial renaissance, a step-change is needed. We didn’t get one in this year’s Budget.