Today’s Budget is not expected to be earth-shattering, coming as it does amid a slight slowdown in the economy.
The Financial Times calls it an atmosphere of ‘fiscal claustrophobia’ - now there's a horror film that never got off the ground - and suggests that the economy was £18bn smaller in 2015 than expected a few months ago.
The ongoing uncertainty caused by the EU referendum may help the chancellor politically, in terms of supporting the Government’s campaign against taking ‘a leap into the dark’, but financially it means he is likely to be…well, conservative.
Last year a cap on welfare spending had to be abandoned amid a reversal on plans to cut £4.4bn in tax credits, this time the papers predict cuts in spending will be pencilled in for 2019-20 giving the chancellor both breathing space and wriggle room.
There is also a prediction that Mr Osborne will admit he has failed to cut debt as a share of GDP this year and so has broken a second of his three golden rules.
As with the recommendations from the National Infrastructure Commission on Manchester to Leeds connections, which the chancellor is expected to back, all this means the Budget is likely to be less ‘Big Bang’ and more about making the best of a patchy situation.
Mr Osborne is expected to provide cash towards Trans-Pennine connections, although this could just be seed money to get projects off the ground or an initial installment to support upgrade works rather than money for new track or roads.
Crossrail 2 is also expected to receive the chancellor’s backing, after receiving warm (if not always quantified) support from the NIC as well.
As with the Trans-Pennine connections any construction work would not begin for years, giving the chancellor the chance to commit to the schemes, while only budgeting for short-term modest expenditure to start the ball rolling.
Another key area to watch out for is the Shaw report into Network Rail re-organisation, which is expected to be published alongside the budget and call for devolution of regional routes and some private investment.
The Guardian reports that: ‘Shaw believes the best solution for Network Rail, which has been hit by a series of cost overruns, is to give more autonomy to regional managers while retaining a powerful head office.’
Nevertheless, it would be somewhat out of character for the chancellor to not take the opportunity to sweat Network Rail’s assets and find some way to raise revenue from its massive estate.
The Apprenticeship Levy could get a mention today, what with it being National Apprenticeship Week, and given the uncertainty mounting in local government circles over the costs and strategy for the project.
The chancellor could take the opportunity to clarify the situation. He could even devolve some of the spending together with new responsibilities for councils, which of course is in keeping with the ‘transparency and powers’ or ‘less money, more responsibility’ trend – depending on your politics - of localism.
Members of the Local Government Association (LGA) have complained that no one knows what the levy would be spent on yet, and have called for the system to be devolved so councils can coordinate efforts and match apprenticeships to local economic needs.
In a statement the LGA said: 'Paying the Government's new Apprenticeship Levy and meeting national apprenticeship targets will cost councils at least £600m a year.'
‘All public and private employers with a wage bill of more than £3m will have to contribute 0.5% in a new Apprenticeship Levy from April 2017 to fund the creation of 3 million new apprenticeships by the end of the decade. The LGA calculates that paying this Levy will cost local authorities £207m a year. The Government has also set all public sector employers an annual target of 2.3% of an employers' workforce to be apprentices. This represents an eight-fold increase and would force councils affected to find an extra £400m in wages.’
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