The Government has finally published its long-awaited Energy Strategy, against the backdrop of soaring global energy prices to improve the UK’s energy independence. GK Strategy Consultant Sam Tankard takes a closer look.
It is not unreasonable to take the position that technology firms – at the cutting edge of innovation through new product and service development – should steer well away from the complex world of politics. However this overlooks the reality that the policy and regulatory decisions underpinning the sector’s operating environment are by their nature, political, and therefore engaging proactively with policymakers to help shape that future environment makes good business sense.
The range of current Government workstreams on technology and digital issues is vast. From the future of the UK’s data and privacy regime, to innovation and digital regulation, online safety, competition in digital markets, cyber security, AI technologies, digital tax and online advertising – there is a significant amount of thinking going on across Government about how policy and regulation should be shaped in response and to promote growth in this and other sectors where ministers see opportunities for the UK to develop a competitive edge in the post-Brexit environment.
Indeed for SMEs or newer entrants to the market, the risks of sitting back are even greater, as established players and those with the loudest voices look to either maintain the status quo or shape the regulatory environment in their favour, with heavy handed regulators also getting involved and creating a stifling environment for growth.
The tech sector is the fastest growing in the UK economy, but there is no monopoly of wisdom within Government about how best to tackle the challenges it faces. The risks of unintended consequences are significant. It is essential therefore that technology firms communicate effectively about the value of tech and work with the Government to shape the policy and regulatory environment in a way that creates a positive environment for long-term growth. Tech is political – and so it ought to be. But it is essential that companies take advantage of opportunities to be part of the conversation within Government and beyond.
Our team has significant experience of advising technology companies, helping them to engage with policymakers on a range of digital policy issues. If you would be interested in a conversation, please contact Will Blackman at will@gkstrategy.com
Perspective by David Laws, GK Adviser
Last week the Chancellor, Rishi Sunak, made a few waves in the education sector by announcing in his Spring Statement a “review” of government policy on employer training, including the Apprenticeship Levy. The announcement caught many by surprise, including apparently some of the Chancellor’s colleagues in the Education Department.
By the end of the week, some were suggesting that the “review” was not a formal “Review”, and might not result in much change in the Levy. So, what exactly is going on? Well, the Apprenticeship Levy seems to have strong backing in the government, and indeed across the political parties. Inevitably, there are often calls for tweaks, for more “flexibility” and for a variety of different reforms – not all of which are mutually compatible.
The Chancellor’s “review” could result in looking again at some of these practical issues, which also include the extent to which the existing Levy is being used to support new entrants into the labour market, as opposed to existing staff (some of whom may already have higher level, tax-payer supported, qualifications). But the Chancellor might have something new or “additional” in mind, to work alongside the Levy. In his recent “Mais Lecture” the Chancellor started to set out his vision of a post-pandemic economic strategy, including “investment in people”. Some have speculated that he may want to introduce some sort of discrete tax credit to incentivise training. This would presumably involve reformulating the existing tax relief for training which is available through the corporation tax system. The aim, in any case, seems to be to raise the amount of expenditure by employers on training, and improve its quality and focus. The review will look at whether current incentives are delivering the “right kinds of training”.
What should those interested in the Apprenticeship Levy make of all this? It seems if there is still a strong commitment to the principle of the Levy, and a desire in some parts of government not to rock the boat too much. This could suggest that the review will make small changes to the Levy, while perhaps restructuring other training reliefs.
But it would be unwise to take any review into this area for granted – not least one where the powerful Treasury appears to be in the driving seat. To the extent that the review does look at if “the current tax system is incentivising the right kinds of training”, the review could ask some fundamental questions, which could have both direct and indirect effects on the Levy. This could include looking at issues raised by the Augar Review, around the support for higher level apprenticeships.
Whether this “review” is one with a small “r” or capital “R”, all those interested in the Levy and the future of government policy on training support incentives should be using this as an opportunity to feed into government their views on how the system should evolve. The review is going to need to address some fundamental issues, and what impact this will have on future government policy on training cannot be taken for granted.
GK adviser and education expert, Monica Thompson, shares her thoughts on the Government’s new Schools White Paper
Read your copy here: The Schools White Paper
to discuss the White Paper and what it means for you, please email Monica@gkstrategy.com to set up a meeting
“Well, you might almost think that there is an election on the way! Or maybe that the Chancellor is seeking to position himself more favourably with Tory MPs in case there is a leadership election any time soon.
“This is the Chancellor, after all, who until recently had been jacking taxes up through the roof – higher NICs, frozen personal allowances, higher corporation tax. Today, he moved to cut petrol duties by 5p per litre, increase the amount people can earn before paying national insurance and – the big rabbit out of the hat – announced a 1p cut in the basic rate of income, for 2024.
“This package will cheer up Tory backbenchers, many voters and the Conservative supporting media. But it’s not obvious that the Chancellor has tackled the broad range of problems confronting the economy.
“Inflation is set to average 7.4% this year, which will squeeze living standards, not least for those too poor to benefit from the higher national insurance threshold. The package delivered very little for those on the lowest incomes – poverty is likely to increase notably. Perhaps the Chancellor has decided that those in poverty are not his target audience?
“Growth forecasts have been slashed almost in half for the current year, which will boost borrowing. Debt interest payments are surging higher because of rocketing inflation. The Chancellor is gambling on growth being strong enough to keep the deficit falling, but there are significant risks here.
“Meanwhile, many people will wonder what sense there is in increasing national insurance by 1.25% now, and then cutting income tax by 1% in two years time. This means lower taxes for pensioners and high taxes on workers – not perhaps much economic sense or fairness.
“Beneath these headline announcements are some interesting suggestions of policy changes to boost training and reform R and D tax credits. As ever with these statements, we now need to look closely at the small print.”
When Rishi Sunak rises to deliver today’s Spring Statement, it would be easy to forget that he has been ChanceIlor for barely two years. At the same time, it’s hard to recall any Chancellor who has had quite such a fierce baptism of fire. A plausible case could made for Hugh Dalton in 1945 (immediately after the Second World War) or Sir Geoffrey Howe in 1979 (following the so-called ‘Winter of Discontent’). But Sunak has had perhaps the hardest inheritance of all. Not only did he become Chancellor with precious little ministerial experience, but he took over in unusually difficult circumstances – after 10 Downing Street had made the position of his predecessor and friend, Sajid Javid, completely untenable. Then, almost immediately, Sunak was confronted by a Covid-inspired economic meltdown before, more recently, the gravest cost of living crisis since the 1970s.
Despite delivering just three Budgets – which is three more, incidentally, than Javid – Sunak has already made a profound impression on British politics. Indeed, he was almost omni-present during the Covid crisis and introduced everything from the popular (but probably counter-productive) ‘Eat out to help out’ initiative to some highly successful but hugely expensive job retention schemes. Consequently, as the Institute for Fiscal Studies (IfS) has pointed out, Sunak (a self-proclaimed low tax Conservative) has felt it necessary to announce bigger tax increases in his two years at 11 Downing Street than Labour’s Gordon Brown managed in a full decade. To the annoyance of countless employers and many of Sunak’s own Conservative colleagues, they include some major (and pledge-breaking) increases in corporation tax – the first since Denis Healey’s traumatic spell at the Treasury in the 1970s.
The comparison with Healey is surely not one that Sunak would welcome. Healey’s period as Chancellor was plagued by many of the same problems – especially squeezed living standards, sluggish growth and persistent inflation (‘stagflation’) – that Sunak is now desperately seeking to tackle. Ultimately, Healey’s solutions proved ineffective, colleagues were alienated by some of his key decisions (especially breaching agreed manifesto policies) and the party’s leadership eluded him so, for Sunak, the precedent is hardly encouraging.
In one respect, however, the comparison with Healey is not only fair to Sunak but personally flattering. Just as Healey was never fazed by a challenge – whether during his wartime service, in government (as Chancellor and Defence Secretary) or in Opposition (as deputy Labour leader) – Sunak has consistently showed astonishing composure and resilience in the face of successive crises. Although his critics argue that he’s sometimes ‘behind the curve’ when responding to fast-deteriorating economic predicaments, it’s also noticeable that he’s happy to revisit earlier decisions and, if necessary, take steps that go completely against Treasury orthodoxies, his party’s previous stances and his own political instincts.
We may see, today, more of the same as the Chancellor considers whether his previous package on energy costs – announced only last month (although it seems much longer ago) – remains tenable when inflation and energy prices seem set to remain ‘higher for longer’ than anyone had expected. Expect ‘friendly fire’ from Conservatives who want fuel taxes to be sharply cut and the upcoming National Insurance increase to be deferred. Meanwhile, many criticisms from Labour frontbenchers are likely to be framed in personalised terms as they seek to blame the ‘cost of living crisis’ on the Chancellor and his decisions, as far as possible, rather than on worldwide events. It might not feel like it to Sunak but it’s a political compliment – reflecting the Opposition’s desire to remove some of the post-Covid sheen from someone they regard as the most likely successor to the Prime Minister (despite the Foreign Secretary’s rising standing) if the ‘partygate’ scandal, or any other, ultimately claims his scalp.
In some respects, we’re likely to see ‘more of the same’ from the Chancellor today in the form of the seriousness, courtesy and calmness that we’ve come to expect over the past two years, despite their constant crisis mode, which have ensured that – unlike Dalton, Howe or Healey – Rishi Sunak is still well-placed to make the move from Number 11 to Number 10. Is it a role that he wants? Only he will know for certain. But three things do seem different when compared with his Budget, back in October. First, since then, the Chancellor has successfully put some distance between himself and the Prime Minister – making it clear that he disagreed with No 10’s ‘partygate’ culture, as well as with some of his boss’s recent language. Secondly, the communications operation surrounding the Chancellor has become more restrained and less heavily ‘Rishi’-branded, which had become a source of irritation to some colleagues. Finally, and similarly, the Spring Statement has been preceded by a period of comparative silence from the Chancellor’s team, after its pre-Budget briefings were widely considered excessive. True, the Spring Statement is less significant than the annual Budget and events are moving so fast than any pre-briefing could soon unravel. But these are also signs of a seriousness of purpose that seems well-aligned with the increasingly difficult times in which we’re now living.
It’s clearly impossible to predict what the Spring Statement will actually say. There will, presumably, be fresh measures to help people (particularly lower earners) with their energy bills; changes to National Insurance (perhaps its threshold) might reduce the impact of the planned increase in NI rates themselves; and benefits could be index-linked differently, or more regularly, to reduce the huge gap between next month’s planned increase (3.1%) and real-world, real-time inflation.
One thing does seem certain, however. As the IfS has argued, “Sunak can smooth, delay and ameliorate the pain. But he can’t make it go away.” Quite simply, the pressure on living standards is greater than at any time for nearly 50 years. For the Chancellor, two years into his tenure, the crisis mode shows absolutely no sign of ending.
To discuss the Spring Statement and what it means for you please contact IWilton@gkstrategy.com