For a chancellor who billed his budget as a moment to kickstart the UK’s economic rebirth after the pandemic, Rishi Sunak’s hour-long speech lacked substance.
A reform of alcohol duties – which seemed to excite the teetotal Sunak enough to visit a brewery immediately after the speech – may help the drinks industry, but it was a distraction too far for many business leaders. They were left in the dark about the overall strategy and how policies were likely to be implemented.
The much-vaunted “levelling up” agenda remains a largely unclear, if not confused, concept. The fresh pots of money Sunak offered to councils to improve their high streets and to metro mayors to widen local transport networks could not disguise the lack of focus.
Looking back at the Tory conference in September, there were plenty of fringe meetings debating what kind of framework for investment in the regions ministers could adopt. Newly elected Conservative MPs from northern constituencies were excited at the prospect of a boost to local finances.
However, it seems the Treasury, concerned about the vast sums needed to make even a slight difference to parts of the UK neglected for a century or more, is in part redirecting money from the south rather than coming up with fresh capital – a strategy that could be described as levelling down.
Ministers have also ignored calls for devolved powers to be enhanced to make sure investments are based on the needs of local businesses. Grants and loans will, as usual, be tightly managed from the centre.
A major part of levelling up the country, according to most mayors, would be a high-speed train network from London to Manchester and Leeds, as a precursor to a similar line crossing the Pennines from Liverpool to Hull. Only the stretch of HS2 from London to Birmingham is under construction. Rumours of the spur from Birmingham to Leeds getting the chop undermine the investments that could be made in the north. There was no mention of HS2 in the budget speech.
Sunak made much of the £7bn of giveaways to business ratepayers, saving many small shops and factory owners from a rise in the tax next year. Businesses welcomed the scale of the relief, and yet they were waiting for the chancellor to tell them about a more fundamental reform of rates he had promised. It was not forthcoming; there was no indication of when it might emerge.
Fuel duty was frozen and air passenger duty for internal flights was cut. Many businesses welcomed the moves, notwithstanding criticism by green groups, but were waiting for a clearer statement about carbon taxes and what the government thinks about who will pay and why. That too was not forthcoming.
For the economy to turn the page on an era of low productivity, low wages and low growth, the chancellor needed to go further than a swath of spending on new roads, nuclear power and football pitches. Long-term investment is the key. The question is whether Sunak has a strategy for the economy – or just for the next election.
A look at his “super deduction” tax relief on the purchase of new machinery is a case in point. It is worth 130% of each pound spent and should dramatically increase investment from -2.5% this year to 15% in 2022, says the Office for Budget Responsibility. However, it predicts business investment will then fall to 4.7% in 2023 and -0.8% in 2024. This is the same scenario as we saw with George Osborne – the austere chancellor who tied business support tightly to the electoral cycle, not the needs of the sector.
As if to emphasise how close he is to Osborne, Sunak rounded off his speech promising Tory backbenchers he would do all he could to cut taxes before the next election. That is a recipe for stop-start economics, not the rebirth he promised.
Retailers pull out all the stops for Christmas
Christmas was more or less cancelled last year, but retailers and brands are clearly hoping for much more in 2021, as they hit us with the highest advertising spending on record. The turkeys and pigs in blankets may be in short supply, but with many middle-class families having saved thousands by working from home, there’s a race on to get them to open their piggy banks.
There are high hopes that retailing’s “golden quarter” will be more normal this year after businesses slashed ad spending and toned down their campaigns in 2020 in response to the pandemic. Things do look set to be different: last year, stores were closed across large parts of the UK in the November lockdown, then shoppers were stopped from hitting the high street in some major cities, including London, for part of December.
While the government appears determined to avoid further lockdowns, the number of visitors to city centres remains lacklustre. Last week’s budget didn’t exactly bring the feelgood factor for many, while clogged ports, stock shortages and inflation are unlikely to engender shopper confidence.
Getting the tone right will be tricky for retailers and brands if they want to ensure they don’t waste their cash. A major test of the water will be the launch of the John Lewis and Marks & Spencer seasonal advertising campaigns, which are expected to go live soon.
Following a major misfire with its latest home insurance ad this month, which had to be pulled after a warning from the financial regulator that it could be misleading, John Lewis is going to be under particular scrutiny, despite many years of successfully cosy festive presentations.
At the end of another bruising year, retailers will need to be more creative and thoughtful than ever to persuade a nervous public to part with their pounds.
Facebook’s metaverse will be profit-driven
Figures roam a digital world, using avatars to move around and communicate, even as their bodies remain far apart back in the physical realm. Welcome to the metaverse.
That is the vision that Facebook founder Mark Zuckerberg unveiled to the world on Thursday as he announced (via some weirdly unsettling videos) that his social network holding company will be renamed Meta. Yet the concept will also be familiar to readers of Snow Crash, the 1992 novel by Neal Stephenson that coined the term “metaverse”, and popularised “avatar” in a digital context. Stephenson’s prescience is so venerated in tech circles that he has served as an adviser to Jeff Bezos’s rocket company, Blue Origin, and “chief futurist” to a virtual reality company.
In many ways, digital extensions of ourselves in a deeper metaverse should be embraced. The potential for art, entertainment and communication is obvious, and pandemic video calls have demonstrated beyond doubt certain benefits, such as reducing polluting business travel.
Yet now that Stephenson’s fiction moves closer to reality, Snow Crash makes for uneasy reading for anyone trying to understand the implications of Zuckerberg’s plan. It is set in a violent America that is divided into hyper-capitalist enclaves in which religious zealots vie for control using deadly computer viruses. So far so good on that front, given Facebook’s role in global political and cultural polarisation.
The comparison with Stephenson’s neon-lit world also highlights a striking omission from Meta’s launch videos: any mention of money or advertising. Facebook’s mission page says it wants to “bring the world closer together”, but the company’s driving force is money made from selling attention to advertisers. Virtual reality is exciting right up until virtual billboards are sitting on screens an inch from your eyeballs.
The lesson of Facebook’s rise is that we must be wary of its early power grabs. If Meta creates its own digital walled garden – where it is likely that Facebook’s own lucrative services would be favoured – it should raise concerns from regulators, who are already challenging the company over monopoly allegations.