Countdown to Brexit: Money, money, money
3 Jul 2019 02:18 PM
Neil Ross, Policy Manager for Digital Economy, looks into the spending promises of the candidates to be PM and what it means for the tech sector.
Welcome to the first, in I’m sure what will be many, of techUK’s countdown to Brexit insights. I’m Neil techUK’s new Policy Manager for Digital Economy. I’ll be helping techUK members navigate Brexit and working hard on your behalf to ensure we mitigate the challenges Brexit poses. More positively, I will also be examining wider issues of economic policy including innovation and competitiveness.
As part of this work on Brexit I will be producing a series of insights for our members as we countdown to Brexit (again) on October 31 (maybe). These insights will be a regular update on all things Brexit, the key actors who are shaping the UK’s withdrawal from the European Union and the impacts on the UK tech industry.
In the first of these entries we’ll be looking at the very latest from the Conservative leadership election.
As of 3 July 2019, we are 120 days away from Brexit, 20 days away from Theresa May’s successor as Prime Minister and the theme of today’s insight is money, money, money – cue ABBA (again).
Any election is expensive. In order to win support from key groups, reassure supporters and win over new audience’s politicians commit to support policy ideas and programs, and this costs. This Conservative leadership election is no different, however it is remarkable due to the sheer amount of money that is being pledged.
Despite his relatively limited number of media appearances Boris has found time to splash the cash, pledging to cut taxes, hike the national living wage and fund infrastructure. From camp Hunt, extra spending on defence, cuts to corporation tax, national insurance and a package of support for farmers and fisherman in the instance of a no deal Brexit.
The reality is that not all of these spending pledges will come to pass. Once the leadership election is won and new priorities are established these promises will likely be forgotten, delayed or explained away. No-deal, if the successful PM chooses to go for this option, will provide more than enough of a reason for this.
However, at the route of this, and key for our members, is that there is now an increasing willingness within the Conservative Party to ditch the tight fiscal and monetary management of the Cameron-Osbourne era. Instead both candidates see a political imperative that their version of Brexit, deal or no deal, is followed by an uptick in the economy. This means both are much more willing to cut taxes and spend more to lift the economy out of its current stagnation.
Boris’ team have been keen to highlight that their man is ready to ‘turn on the taps’ in terms of public spending, pointing to the increased spending and tax cuts of the Trump administration as model for how to turbocharge the UK economy. Jeremy Hunt’s spending pledges point to shared approach between the two candidates.
As well as an illuminating change in how the Conservative party approaches the public finances this new policy direction presents an opportunity for the UK tech industry. In the event of any Brexit the new Prime Minister will be determined to see the UK economy improve and they will be willing to provide tax relief and inject cash into key growth areas to achieve this.
As a high growth sector, the UK tech industry is ideally placed to push for its fair share of any stimulus resulting from the Government’s desire to boost the economy. In our last budget submission techUK called for tax relief to support operation expenditure in order to increase investment in productivity boosting technologies, investment to improve connectivity and more ambitious measures to ensure the UK Government hits its target to spend 2.4% of GDP on R&D (you can read our full budget submission here). The measures set out in our submission highlight the kind of investments needed to secure the long term future of the UK tech sector in normal times, however under a Brexit deal and in the case of no-deal extra efforts will be needed from the Government to ensure the UK remains a world leading economy for tech businesses. techUK will engage with members on the best places where Government money could be spent to boost the tech sector following the appointment of the new PM.
However, irrespective of these spending pledges a no-deal Brexit remains a bad outcome for the UK tech sector and would almost certainly have a deeply negative impact. Therefore, regardless of what either candidate choses to spend, techUK will continue to make the case to the next Prime Minister, whether Boris Johnson or Jeremy Hunt, that no-deal is not a good outcome for UK tech.