ALEX BRUMMER: Jeremy Hunt boards the fast train – Chancellor a fan of big infrastructure and role it can play in boosting energy security, productivity and growth
- Hunt understands that if new nuclear is to flourish, government needs to invest
- It cannot rely on an unsafe partner in China or the French government
- Hunt has stuck with HS2 to Manchester
- He believes Tokyo to Osaka bullet train shows growth can be generated
Calling the shots: Chancellor Jeremy Hunt
The scale of the tax hits, startling levels of debt and interest payments and a focus on protecting the vulnerable, dominate the discussion about Jeremy Hunt’s maiden budget.
After all, establishing a credible fiscal strategy is what the Autumn Statement is all about, even if hammering the working population with swingeing tax increases, when the pips already squeak from double-digit inflation and rising interest rates, may not be the smartest way forward.
Careful reading of Hunt’s speech, for those who managed to stay with it after a series of revenue raising shocks, reveals a second layer about which we may hear a great deal more in the coming months. The Chancellor, it would appear, is a fan of big infrastructure and the role it can play in boosting energy security, productivity and growth.
In spite being on the wrong side of the Brexit debate, he recognises the opportunity that being free of Brussels bureaucracy presents for the UK’s leading life sciences and financial sector firms, along with advanced technology.
On the infrastructure front, Hunt understands that if new nuclear is to flourish in the UK, giving the country the reliable power baseload required to support renewables, the British government needs to reach into the Exchequer. It cannot rely on an unsafe partner in China or the French government (owner of most of our nuclear fleet through EDF) to call all of the shots.
That is why, contrary to much of the speculation, Sizewell C in Suffolk came through the review of capital spending intact. Better than that, the UK is putting an initial £700m behind the clock to keep EDF engaged.
For the capital budget ghouls, HS2 has looked like an obvious target. Over-budget, complex and the subject of intense Nimbyism in Tory-held seats, it looked like a sitting duck. The Leeds arm of the project had already been lopped off, but Hunt has stuck with HS2 to Manchester and believes you only have to look at the impact of the Tokyo to Osaka bullet train, built more than a half-century ago, to understand the growth which can be generated. He is thought to be among a small group of ministers who would have liked a branch that connected Birmingham directly to Heathrow.
The real test of Hunt’s mettle at the Treasury will be the embrace of Big Bang II. He has begun that process for the City after reaching a deal with the Bank of England’s prudential arm on vaporising Solvency II and cutting loose insurance from its current restraints. The Chancellor wants to go beyond that.
His long service as health secretary has given him insight into Britain’s brilliance in life sciences, which we saw on display in Covid-19. Here again, being free of EU regulation could deliver huge benefits.
At present UK universities are pioneers in gene therapies but Brussels rules severely restrict what can be done, including making some of the work commercial. By setting its own rules, the UK could become a global champion, attracting inward investment from the US and Japan. Similarly, a fast-track, technological approach to new therapies by regulator the MHRA could underpin big pharma in this country.
A concern of those of us who supported the Liz Truss/Kwasi Kwarteng concept of investment zones is that they have been ditched by levelling up boss Michael Gove. There is, however, to be a new iteration. Instead of being spread willy-nilly across the country, Hunt is an advocate of establishing such zones close to universities.
Research and industrial parks have already grown organically in Oxford, Cambridge, Southampton and elsewhere. But why not Bradford, East Anglia, Wolverhampton, Keele, Sunderland and less obvious locations?
Sir Patrick Vallance, known from his pandemic broadcasts, will be looking at this.
It won’t be easy. Successes quoted by Hunt in his budget speech, mayors Andy Street in Birmingham and Ben Houchen in Teesside, have worked because of leadership and willpower. There has to be courage to challenge Nimbyism in the shape of planning wars, wokery in the shape of environmental restrictions and a willingness to fight for tax breaks.
The Budget was very short on specific help for entrepreneurship and enterprise. Indeed, some tax measures, the clampdown on capital gains and dividends, work in the opposite direction. Nevertheless, it is encouraging that innovation is not forgotten.