AS I SEE IT: Can the Chancellor balance climate targets with economic renewal, asks TERRY MURDEN
Chancellor Rishi Sunak has faced some big decisions over the past 18 months, but this week he only has to balance the demands of meeting the government’s net zero strategy with preventing thousands of businesses folding under the burden of rising costs. A walk in the park, eh?
Mr Sunak will deliver his Budget and Spending Review days before 30,000 delegates descend on Glasgow at the weekend to begin formulating their plans for saving the planet. As such, any announcements he makes, particularly on energy and the environment, will be measured against climate targets.
But here’s the dilemma: climate campaigners want energy consumption to be made more expensive, while businesses say they cannot withstand any further cost burdens and are demanding energy price caps or cuts in taxes, such as VAT.
Mr Sunak must also balance his instinct for lower taxation with a short term need to hike taxes to ease pressure on the public finances and meet the soaring cost of supporting the NHS, as well as the Prime Minister’s pledges on “levelling up” Britain.
There is no doubt that the situation facing small and medium-sized firms in particular is critical, thanks to supply chain disruption, labour shortages, soaring energy bills and taxes. James Martin, director of policy at the British Chambers of Commerce warned last week that if help from government is not forthcoming, “then it is unfortunately the case that thousands of firms would not survive the winter as a result” and there is now a “clear case” for an energy cap for small firms. His comments were repeated at the weekend by Liz Cameron, chief executive of the Scottish Chambers, who has written to the Chancellor calling for such a cap to be introduced.
However, the energy companies see things differently. Without allowing the price charged to customers to rise there is the real prospect that many more suppliers will go out of business. Keith Anderson, chief executive of ScottishPower reckons as many as 20 are on the brink and that instead of imposing more price caps the government should tailor support to the least well-off.
How does the Chancellor square these circles?
Firstly, we should expect him to address the growing call to increase investment into the economy by committing to large scale infrastructure projects with a green outcome. Already he’s announced £7bn for transport. Expect one or two renewables rabbits to be plucked from the red case, not only to create jobs and boost productivity, but to soothe the fears of environmentalists that more investment in transport is inherently wrong.
Critics say that plans announced so far will not meet the government’s green targets or deadlines, and observers will be keen to hear if Mr Sunak will be less hesitant in ramping up borrowing in order to pay for the mother of all bills.
To be frank, he has little choice. UK growth is slipping and business needs a confidence a boost that requires public sector commitments that will underpin private sector investment.
Secondly, he will be in hot water if he does not address the energy price issue, something that needs immediate action. A cap to help small firms looks unlikely for reasons stated above, while a VAT holiday would help all businesses.
As with all budgets there is a political dimension to consider, and the levelling up agenda will play a big part (bookies will be laying bets on how many mentions). Almost certainly it will focus on rewarding those areas of the UK that handed the Tories a big majority in 2019 as not doing so will be remembered when they are next asked to vote. As such, don’t be surprised if the north of England gets more attention than the devolved nations.
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business