Did the Budget play to the levelling up agenda?
March 25, 2021
With easing of lockdown measures on the horizon and a strong vaccination programme underway, Chancellor Rishi Sunak delivered his second Budget on Wednesday 3 March. In his speech, he stressed the severity of the pandemic’s impact on the public finances – underlining that driving growth while rebuilding public finances and ‘levelling up’ the UK economy will be a challenging task.
The need to level up has long been recognised, and COVID-19 has only intensified this challenge. It’s no longer enough to drive growth in the ‘left-behind’ regions; it’s now about tackling deep-rooted inequalities across the UK. Our Future of Government research finds that 47% of citizens think central government has the greatest responsibility for reducing inequality. So, how did the Budget align with the commitment to levelling up?
The Budget focused on jobs and livelihoods – two areas critical to levelling up. But housing, local community, and opportunity are also significant. Our research shows 70% of respondents view housing as one of the most effective factors for reducing inequality, and the announcement of a new mortgage guarantee scheme should help more citizens into homeownership.
Access to opportunity is also significant, with our respondents rating access to better-paying jobs as another highly effective lever for levelling up. Significantly, the Budget measures to boost job opportunities – including additional funding for traineeships and apprenticeships – targeted younger workers, who’ve been disproportionately affected by the pandemic.
Our research also highlights people’s concerns about inequalities between London and other parts of the UK. Here the Chancellor’s changes to the business tax regime could well have an effect, with the ‘super-deduction’ investment allowance for plant and machinery potentially favouring areas outside London.
A further key step towards levelling up is creating a vibrant economy that provides well-paid jobs across the whole country. In this context, the Budget included a number of policies to boost investment in ‘left-behind’ areas. These included funds focused on improving transport, broadband connectivity, skills and culture, aiming to help tackle the inequalities exposed by the pandemic. Meanwhile, the creation of eight new Freeports – including seven outside London – is a flagship policy for levelling up.
That said, the Budget was disappointingly quiet about some areas. One was education, with little sign of a long-term plan to recover the hours lost in the pandemic and catalyse new skills. Another was the green agenda and net zero, where we saw a change to the Bank of England’s remit to take account of environmental sustainability and a ‘green’ savings bond, but few new tax or spending announcements. The freeze on fuel duties will help levelling up by keeping more pennies in driver pockets, but it’s hard to see how it squares with the Government’s commitment to net-zero by 2050.
Our research shows 44% of citizens feel the pandemic has left society more divided – while only 39% think it’s helped their community come together. As we look to recovery, the tax system and public spending are two key levers the Government can use to boost equality. The Budget made some progress towards levelling up, but the task is far from finished. The challenge now is to increase the pace while repairing the public finances. This won’t be easy. But it’s now more necessary than ever.