Academics and researchers from across Imperial College London have provided analysis of the 2021 Spring budget.
This news story is being updated.
Academics from across Imperial College London have offered reactions and expert comment to the 2021 Spring budget, announced on Wednesday 3 March by Rishi Sunak, Chancellor of the Exchequer.
Among the announcements were new measures to help business and jobs through the pandemic and to support the UK’s long-term economic recovery and a series of tax-raising plans to help rebalance the public finances.
“Invisible shock” for the NHS
Dr Sankalp Chaturvedi, Associate Professor (Organisational Behavior & Leadership) at Imperial College Business School said: “Building the economy for the future was at the core of today’s budget, however mental ill health didn’t get as much recognition as it needed and deserves for future planning. Even though £10m is welcomed to support veterans with mental health needs, NHS and public key workers were completely ignored. They have been under constant and extreme pressure for over a year and they will need significant support from Government supported policies. It would have been nice to get it proactively recognised in the budget too.
“More broadly, even before the pandemic started, the total cost of mental ill health in England was estimated at £105 billion per year. Now, it is estimated up to 600,000 more people will be affected by mental health issues. It is the invisible shock that the NHS will have to cope with for several years into the future.
“It is critical that our leadership understands future challenges ahead of time and take actions proactively rather than playing the catch-up game every time.”
Carol Propper, Professor of Economics at Imperial College Business School: “The budget is generous. But the large drop in economic activity in 2020 brought about by the pandemic remains. It will have long lasting impacts on the demand for public spending, including health care and the need to invest in education, training and jobs. This is crucial to address the long term increases in inequality that have been further exposed by the pandemic.”
Dr Mirabelle Muûls, Assistant Professor in Economics at Imperial College Business School said: “The launch of a national infrastructure bank to foster low-carbon investment and green recovery bonds are welcome. However, despite the climate emergency, there seems to be a missed opportunity to ensure that climate change criteria are included in all parts of the budget. There is no path set for a meaningful carbon price, whether through a tax or cap-and-trade. This budget is definitely not the net zero carbon recovery plan so many had hoped for in the year of COP26.”
Supporting green finance
Professor Maurizio Zollo, Head of Department of Management and Entrepreneurship at Imperial College Business School said: “The budget is generous in supporting the development of technological solutions to the various environmental crises we are experiencing. It also includes important initiatives in support of the diffusion of green finance. The major gap that is now becoming increasingly evident and concerning is the lack of support for the innovation, experimentation and transformational change in business models, in ways to govern, organise and run a business to reach zero carbon and, in time, zero pollution targets across sectors.
“Similarly, the international commitments that the UK government has made vis-à-vis its sustainable development targets require fundamental innovations and experimentations in business governance, organisation and operation. Unfortunately, there is no sign of direct investment in supporting these type of structural changes in the nature and role of business in the creation of a sustainable and just economy.”
NHS capacity constraints
Professor Franco Sassi, Professor of International Health Policy and Economics at Imperial College Business School said: “The lack of additional structural funding for the NHS, beyond the commitment of expenditure to face the pandemic emergency, is disappointing given the large underfunding of the system. Healthcare expenditure in the UK was 43% lower than in Germany and 15% lower than in France, before the pandemic, after accounting for differences in purchasing power. There are major capacity constraints to be overcome in the NHS. The number of doctors, 2.8 per thousand population, is significantly lower than the EU average. The number of nurses has been decreasing in the past 10 years, contrary to what is happened in other European countries. The UK has the second lowest number of hospital beds per population in Europe.
“If these structural capacity constraints are not addressed, the NHS will fail to meet patient needs and expectations in a post-pandemic world. Addressing healthcare capacity constraint cannot be postponed further. It will place additional demands on public finances, already under significant strain, but the risks involved in leaving the NHS underfunded are too great. A sensible use of consumption taxes may work both as a source of additional revenues and as an incentive for healthy and environmentally sustainable consumption. The freeze on alcohol duties, unfortunately, does not seem to go in the right direction.”
Helping small and medium sized businesses
Professor Nelson Phillips, Professor of Innovation and Strategy at Imperial College Business School said: “I am very pleased to see the new measures to support SMEs in the Help to Grow programme. Helping small and medium sized businesses to grow is one of the most effective ways to increase employment and tax revenues. While more is always welcome in this area, the government has included measures that will help firms grow and I am particularly pleased to see measures that recognise the very positive impact that training and management development can have on the growth prospects of these firms.”
Poor on green measures
Dr Ajay Gambhir, Senior Research Fellow at the Grantham Institute for Climate Change and the Environment said: “The budget was poor on specific green measures and felt almost like there was no net-zero target or declared climate emergency in the UK. This didn’t feel like a budget that was fit-for-purpose in driving an acceleration towards net-zero in any way.”
Alyssa Gilbert, Director of Policy and Translation at the Grantham Institute said: “The government seems to have missed the opportunity to integrate net zero more fully into this investment and recovery budget. I hope that the new investment bank – which comes only four years after the government sold off the Green Investment Bank – picks up on the opportunities to de-risk and stimulate a range of green investments.”
Speaking about green savings and green gilts, she said: “The government knows that it needs to make investments now to meet the to meet the UK’s legally-binding targets to reduce greenhouse gas emissions and to adapt to the inevitable impacts of climate change. Some of these investments – ranging from energy efficiency improvements through to the good management of nature, can create jobs, and contribute to the levelling-up agenda and boost the economy – fitting well with the government’s other challenges. The £15 billion of green gilts and the green savings bonds are important pieces of this puzzle – and an attempt for the UK’s finance sector to also play a role in the green finance world.
“These green bonds are an attempt to attract private sector and individual money into the net zero transition, to complement public funds. I hope that these gilts help stimulate, and capture the flow of money from bigger institutional investors and the corporate sector that will really move this agenda forward as quickly as we need, the mobilisation of money from retail customers in savings bonds is a nice way to get a small number of members of the public involved, but will be less important than these larger flows. It is important for us to keep an eye on the criteria for these green savings bonds to make sure they really do what they say on the tin.”
Disruptive mindset and design thinking
Dr Ileana Stigliani, Associate Professor of Design and Innovation at Imperial College Business School said: “Some of the measures announced by the Chancellor will certainly support many businesses as they navigate through this crisis. Businesses should also use a disruptive mindset to rethink their strategies for a post-covid world and should not become too reliant on these government funding sources. There is an opportunity for businesses to use the current global crisis to reimagine how they can work to support their clients and employees with new product and service offerings.
“As we emerge from this crisis, some of the changes implemented now could make businesses more effective, efficient and successful in times of stability. The key to turning problems into opportunities to innovate requires a disruptive mindset. Design thinking as a method of creative problem-solving that turns traditional innovation on its head can help develop this mindset. In the current unpredictable economic climate, Design Thinking can help companies address the financial crisis in a more empathetic and collaborative way.”
Funding for the NHS
Dr Marisa Miraldo, Associate Professor in Health Economics at Imperial College Business School, said: “The budget announcement has unfortunately not delivered on the NHS, social care or prevention funding nor on further mitigation of the short- and long-term impacts of the pandemic on an already underfunded health system pre-pandemic.
“The budget report announces an extra £3 billion to be spent on tackling the elective care backlog to fund one million procedures and diagnostics as well as address waiting times for mental health services. Our research shows that this is unlikely to address the care needs brought about the pandemic. NHS Confederation has projected waiting lists to reach 9.8 million by the end of 2020, requiring substantial increases in capacity just to reduce waiting lists. This is before we even consider the fact that due to prolonged waiting times these patients will require more intensive treatment with cost implications to care provision, or that socioeconomic inequalities brought about by the economic crisis will have a considerable impact on population health.”
Speaking on alcohol duty tax, Dr Miraldo said: “The freeze on alcohol duty is a counterproductive measure. Revenues from alcohol taxes have been found to generate jobs and income which economic benefit offsets the economic losses from less alcohol spending. But more importantly it impacts population health and generates a further strain on care provision. Public Health England has found to be the leading ill-health risk factor for those aged 15 to 49, and the fifth across all age groups leading to decreased productivity of our workforce, through presenteeism and absenteeism, and premature mortality and morbidity. Taxes have been found to be a highly effective policy to mitigate excessive drinking therefore this measure is likely to further aggravate population health, generate avoidable care costs and negatively impact the economy.”
Let’s get fiscal
Dr Harjoat Bhamra, Associate Professor of Finance at Imperial College Business School said: “This a budget for the short-term issues facing the country, caused by COVID-19. There is moderate fiscal support for households: the Furlough scheme will carry on till September. Direct tax rises are focused on business and will occur in the future. There are indirect tax rises for households – tax bands are not being adjusted upwards.
“What is missing is any focus on green issues and longer term issues stemming from climate change. Maybe Rishi hopes to address such issues as a Prime Minister and not a Chancellor.”
Help to grow
Speaking about the Help to Grow scheme, which will help small businesses boost their software and training, David Brown, Director of Executive Education at Imperial College Business School said: “This is potentially hugely positive for UK business. We know that innovation from learning and applying new skills is critical. And that accessing top quality learning is difficult: many firms don’t have the time, money or awareness of what is needed or available. This could help unlock these challenges and save or create jobs.”
Professor Christopher Tucci, Professor of Digital Strategy & Innovation at Imperial College Business School said: “The Chancellor’s new “Help to Grow” scheme will go a long way to help smaller firms of less than 250 employees boost their digital infrastructure and skills. An increase in digital transformation in these firms could help cut costs and boost productivity and help them progress in developing new products, services and business models.”