What does the spring budget mean for your sector?

Our team of policy experts have outlined what Chancellor Jeremy Hunt’s Spring Budget means for your sector.

Health

The announcement of a £5.9 billion investment in the NHS by the Chancellor has been warmly received by NHS leaders and across relevant sectors. However, it is worth examining the promises of “new” funding with some scepticism, particularly with a General Election later this year.

In his Budget, the Chancellor announced £3.4 billion investment in the NHS via a new NHS Productivity Plan. However, only £2.6 billion of this investment is new funding, and has been allocated to the NHS for the period between 2025 and 2028, once a General Election is well out of the way. The remaining £1.2 billion is already in the NHS’s budget for 2024/25 and has been previously announced.

The allocation of funding for digital transformation of the NHS follows reporting from the HSJ last week that £900 million of NHS England’s capital budgets had been transferred away from hospital infrastructure to cover pay rises and the cost of continued doctor strikes. This includes the transfer of £300 million away from tech budgets and £100 million away from the New Hospitals programme.

With this in mind, the question remains as to how much of today’s funding will go towards new innovation, and how much will be used to plug existing funding gaps.

 

Technology

With the Chancellor declaring that the UK is on track to become “the world’s next Silicon Valley”, today’s Spring Budget contained several announcements that seek to make this vision a reality. Against a challenging fiscal backdrop, driving up investment in the UK’s tech sector and boosting productivity took centre stage through a variety of new, targeted spending commitments and policy changes.

This includes a new ‘British ISA’ to incentivise more UK-based retail investment in the sector along with new powers to the Pensions Regulator and Financial Conduct Authority “to attract investment into our technology-related industries”. Additionally, the extension of the 2023 Investment Zones programme will look to enhance AI capabilities, electric vehicle manufacturing, and the use digital technologies.

The Chancellor also confirmed that he will reverse controversial changes to the salary thresholds for angel investors. The original change was unpopular, with worries that it would exclude underrepresented groups from investing opportunities and would result in less funding for startups.

Fresh spending packages were also revealed, including £100 million will be invested in the Turing Institute over the next five years. Supporting SMEs take greater advantage of emerging technology was also in focus, with a new SME Digital Taskforce set to help small and medium sized businesses adopt digital tech.

Finally, on encouraging Research & Development, manufacturing projects across the life sciences, automotive, and aerospace sectors are all set to be supported by total of £270 million in additional investment. The Treasury also revealed that an expert advisory panel would be established by HMRC to “support the administration of R&D relief”.

 

Education

In Education, the Spring Budget presented by the Chancellor, Jeremy Hunt, offered a mixed bag.

Early Years

To support the sector to deliver the expansion of childcare support, the Government is confirming that the hourly rate providers are paid to deliver the free hours offers will increase in line with the metric used at Spring Budget 2023 for the next two years. Today’s announcement gives providers more certainty on future funding so they can invest in expanding their business.

Schools

As part of the Government’s move to strengthen preventative action to reduce demand on public services, it is committing an initial £105 million towards a wave of 15 new special free schools and also confirmed the location of 20 Alternative Provision (AP) free schools.

As feared by many in the sector, there was no extension of funding for the National Tutoring Programme and 16-19 Tuition Fund. Tutoring groups have warned this decision will particularly negatively impact on disadvantaged students.

The Budget document takes pains to say that additional funding for schools announced since Spending Review 2021 totalled more than £2.4 billion in 2023-24 and will be more than £2.8 billion in 2024-25. However, the Institute for Fiscal Studies says actual costs faced by schools are growing faster than overall inflation, with actual pressures on school budgets likely to be much more challenging. These trends also do not account for the large drop in school capital spending, which has fallen significantly over time.

Higher Education

To help boost commercialisation across the UK’s university sector, the government is driving forward implementation of the recommendations from the independent review of university spin-out companies. The Government has asked universities to report on their spin-out policies by the end of May and has also begun consulting on the design of the new £20 million proof-of-concept fund to support universities and future founders to de-risk technology.

Edtech

The Government is also introducing a new data pilot to drive high quality AI in education, which is hoped to reduce workload and support improvements to recruitment and retention.

 

Built Environment

The Spring Budget included several announcements on housing, with the government looking to make progress on its Long-Term Plan for Housing. The Chancellor announced £240 million of funding which will be allocated to housing projects in London, highlighting Barking Riverside and Canary Wharf as two key regeneration schemes. This will unlock up to 8,000 new homes in Barking and 750 homes as well as a new life sciences hub in Canary Wharf.

The government will be launching a new £20 million Community Led Housing scheme, which will ‘support local communities to deliver the developments they want and need’. Details of this scheme are yet be outlined but we expect projects funded as part of this will involve extensive consultation with Local Authorities and communities to give them a voice early in the planning process.

The Chancellor also introduced new measures to encourage growth outside of the UK’s largest cities, announcing £400 million in new investments to extend the 10-year Long-Term Plan for Towns to 20 new places, and £30 million to be injected into capital and regeneration projects across the UK. DLUHC has also published further details of six Investment Zones and specific housing plans for Leeds and Cambridge.

Additionally, a new pilot is being launched that will use AI to speed up the development of Local Plans, as well as new software to streamline processes for planning officers. If successful, these could be significant steps forward for much-needed planning reform.

On the other hand, the abolishment of Stamp Duty Multiple Dwellings Relief is unlikely to be received well by large-scale operators of rental homes. While the Chancellor claims that an external evaluation found that the relief mechanism was being regularly abused, it meant that operators such as the build to rent sector benefitted from lower rates when purchasing schemes with multiple apartments.

 

Energy and sustainability

The Spring Statement included several energy-related announcements. There was a notable lack of truly ‘new’ policies, but the spending package included the largest ever CfD budget, a restatement to the primacy of grid reform, and an extension until 2029 of the energy profits levy on oil and gas.

Increasing funding for Green Industries Growth Accelerator (GIGA)The government announced that they aim to bolster funding for the GIGA, with the budget set to increase by £120 million. This funding will support the expansion of low-carbon manufacturing supply chains across the UK, with allocations of up to £390 million for both offshore wind & electricity networks and Carbon Capture Utilisation Storage (CCUS) and hydrogen supply chains.

Nuclear Energy: The government announced that it has reached an agreement over a £160 million nuclear development deal with Hitachi. The Chancellor also revealed that the Government have moved to the next stage of the Small Modular Reactor competitive process, with six companies now invited to submit their initial tender responses by June.

Energy Profits Levy Extension (EPL): The Government announced that it will be extending the EPL until March 2029, this is intended to ensure that oil and gas producers pay ‘their fair share’ of tax from ‘extraordinary profits’ caused by energy security issues. There was an accompanying declaration in the budget that the levy will not apply if prices fall below levels set by the Energy Security Investment Mechanism, providing certainty to the sector.

Electricity Grid Reform: The government will implement a new ‘stringent connections process’ from January 2025 and work with the Electricity System Operator (ESO) to outline further interim reforms to the grid queue process by summer 2024. The government will establish the National ESO in 2024 and will publish new community benefits guidance by June.

Contracts for Difference: The government has published full parameters for the Contracts for Difference Allocation Round 6 (AR6), including setting the largest ever budget for a single round, of over £1 billion.

Manufacturing: The government reaffirmed its ‘continued commitment’ to making the UK a hub for manufacturing, with funding packages allocated to strategic sectors like aerospace, life sciences, and clean energy. This funding includes £270 million of combined government and industry investment into cutting edge R&D projects.

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