For a chancellor who framed his budget as a time to jumpstart the UK’s economic revival after the pandemic, Rishi Sunak’s hour-long speech lacked substance.
Alcohol tax reform – which seemed to excite Sunak enough to visit a brewery immediately after the speech – might help the beverage industry, but it was too much of a distraction for many business leaders. They were left in the dark about the overall strategy and how the policies were likely to be implemented.
The much-vaunted ârace to the topâ agenda remains a largely unclear, if not confusing, concept. The new pots of money that Sunak offered to municipalities to improve their main streets and to metro mayors to expand local transport networks could not mask the lack of focus.
Thinking back to the Conservatives’ conference in September, there were many side meetings to discuss what kind of framework for investment in regions ministers could adopt. Newly elected Conservative MPs from northern ridings were excited about the prospect of a boost to local finances.
However, it appears that the Treasury, concerned about the massive sums of money needed to make a small difference in parts of the UK neglected for a century or more, are partly redirecting money from the south rather than finding new capital – a strategy that could be described as a race to the bottom.
Ministers also ignored calls to strengthen devolved powers to ensure investments are based on the needs of local businesses. Grants and loans will, as usual, be closely managed from the center.
According to most mayors, a major part of leveling the country is a network of high speed trains from London to Manchester and Leeds, the precursor of a similar line crossing the Pennines from Liverpool to Hull. Only the HS2 section from London to Birmingham is under construction. Rumors that the Birmingham spur at Leeds has been cut are undermining any investments that could be made in the north. There was no mention of HS2 in the budget speech.
Sunak has benefited greatly from the Â£ 7 billion in giveaways to commercial taxpayers, saving many small shops and factory owners from a tax hike next year. Businesses hailed the scale of the relief, yet they waited for the Chancellor to talk to them about a more fundamental rate reform he had promised. It was not to come; there was no indication of when he might emerge.
Fuel taxes have been frozen and air passenger taxes for domestic flights have been reduced. Many companies hailed the move, despite criticism from green groups, but were waiting for a clearer statement on carbon taxes and what the government thinks about who will pay and why. This was not to come either.
For the economy to turn the page of an era of low productivity, low wages and low growth, the Chancellor had to go beyond spending a fringe on new roads, nuclear power and football pitches . Long term investing is the key. The question is whether Sunak has a strategy for the economy – or just for the next election.
A glance at its âsuper deductionâ tax break on the purchase of new machinery is a case in point. It’s worth 130% of every pound spent and is expected to dramatically increase investment from -2.5% this year to 15% in 2022, according to the Office for Budget Responsibility. However, he predicts that business investment will then drop to 4.7% in 2023 and -0.8% in 2024. This is the same scenario we saw with George Osborne – the austere Chancellor who closely linked support to businesses to the electoral cycle, and not to the needs of the sector.
As if to emphasize how close he is to Osborne, Sunak concluded his speech by promising Tory backbench MPs that he would do everything possible to cut taxes ahead of the next election. It’s a recipe for the stop-start economy, not the renaissance it promised.
Shopkeepers are doing everything they can for Christmas
Christmas was more or less canceled last year, but retailers and brands are clearly hoping for a lot more in 2021 as they hit us with the highest ad spend on record. Turkeys and pigs in blankets may be rare, but with many middle-class families having saved thousands by working from home, there is a race to get them to open their piggy banks.
There are high hopes that the ‘golden quarter’ of retail will be more normal this year after businesses cut ad spending and tone down campaigns in 2020 in response to the pandemic. Things appear to be different: Last year shops were closed in large parts of the UK during the November shutdown, and then shoppers were barred from walking on the main drag in some major towns, including London, during part of December.
While the government appears determined to avoid further lockdowns, the number of visitors to city centers remains low. Last week’s budget didn’t really add the feel-good factor to many, while clogged ports, inventory shortages and inflation are unlikely to inspire buyer confidence.
Finding the right tone will be difficult for retailers and brands if they want to make sure they don’t waste their money. A major test of the water will be the launch of the seasonal John Lewis and Marks & Spencer advertising campaigns, which are expected to go live soon.
Following a major hiccup with his 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 will come under scrutiny special, despite many years of successful festive presentations.
At the end of another murderous year, retailers will need to be more creative and thoughtful than ever to persuade a nervous audience to shed their pounds.
Facebook’s metaverse will be profit driven
The characters roam a digital world, using avatars to move and communicate, even though their bodies remain distant from each other in the physical realm. Welcome to the metaverse.
This is the vision that Facebook founder Mark Zuckerberg unveiled to the world on Thursday by announcing (via weirdly disturbing videos) that his social media holding company would be renamed Meta. Yet the concept will also be familiar to readers of Snow accident, the 1992 novel by Neal Stephenson who coined the term “metaverse” and popularized “avatar” in a digital context. Stephenson’s foreknowledge is so revered in tech circles that he served as an advisor to Jeff Bezos’ 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 evident, and pandemic video calling has undoubtedly demonstrated some benefits, such as reducing polluting business travel.
Yet now that Stephenson’s fiction is getting closer to reality, Snow accident makes it difficult to read for anyone trying to understand the implications of Zuckerberg’s plan. It takes place in a violent America divided into hypercapitalist enclaves in which religious fanatics vie for control with the help of deadly computer viruses. So far all is well on this front, given Facebook’s role in global political and cultural polarization.
The comparison to Stephenson’s neon-lit world also highlights one striking omission from the Meta launch videos: any mention of money or publicity. Facebook’s mission page says it wants to “bring the world together,” but the driving force behind the business is the money made by selling attention to advertisers. Virtual reality is exciting until virtual billboards are installed on screens an inch away from your eyeballs.
The lesson of Facebook’s rise to power is that we need to be wary of its early takeovers. If Meta sets up its own digital walled garden – where it’s likely Facebook’s own lucrative services would be favored – that should raise concerns from regulators, who are already challenging the company over monopoly claims.