When George Osborne sat down I think he thought he had managed to get away with it. Presenting a tax break for the highest paid as a comprehensive industrial policy was an audacious move, but the chancellor is not a man lacking in confidence.
After Ed Miliband’s devastating response the smile was much less assured and by the time, an hour later, that #grannytax was trending on twitter I think even the chancellor will have realised Ed was right in one thing at least – he will no longer get away with saying “We’re all in this together.”
But beyond the political messages, for the ICT industry the key question must be: is this a budget for growth in general and for ICT in particular?
Before the budget it was increasingly clear that the government had no coherent strategy for growth. Only a few weeks ago, the secretary of state for business, Vince Cable, the man in charge of the Department for Growth, was writing to the prime minister complaining that there was no ‘compelling vision’ for growth. The letter as a whole makes for fascinating reading and can be found here.
The pressure was on Osborne because increasingly industry was saying publicly what it had been saying privately for the last year – that an active industrial policy was the big gap in this government’s growth policy.
Fiscal restraint is necessary to get the deficit down but you cannot cut yourself out of a recession. If people have no money and no hope, there will be no demand, and without demand the market cannot function. The fact that the country is set to borrow £150 billion more than the chancellor planned in his spending review is a testament to failed economic policies, which have delivered slower growth and higher unemployment.
So we needed a gamechanger, something that would, as the chancellor promised last year, put fuel in the engine of growth.
Having listened very carefully to the budget, the only items I can find which were not pre-announced or leaked over the past few weeks are: the freezing of pensioner’s allowances, the £50 million for broadband in smaller cities and the £100m for science capital expenditure, including a centre for aerospace.
Taking £3 billion out of the incomes of pensioners will only take more demand out of the economy, so let us focus on the other two.
The ICT industries will benefit from investment in digital infrastructure, indeed a comprehensive and ubiquitous digital infrastructure is today’s essential utility.
The £50 million for small cities comes in addition to the £100m for larger cities announced previously. The aim is to ensure ultrafast (around 100Mbits) broadband in urban areas.
But the real digital divide today is between those who have broadband and those who do not. Over two million people do not have access to decent broadband, many in rural areas, many desperate to get their businesses online, or download their school assignments, or upload the files required by DEFRA (Department for Environment, Food and Rural Affairs). That is where the real low-hanging economic gain is to be found and the chancellor has completely ignored that opportunity, focusing instead on cities where the market will deliver and the benefits of the additional £150 million are much harder to estimate.
The additional money for science capital expenditure is also welcome, but as the Campaign for Science and Engineering so politely put it, when compared against the multi-billion pound, 50 percent cut in capital expenditure that the chancellor has already implemented ‘it leaves a considerable shortfall’.
They went on to point out that other countries, including those with their own economic challenges were continuing to invest in science: “In 2012, Germany will boost federal research and education spending to £11.3 billion, an increase of 10 per cent from 2011. In China, £3.3 billion for basic research is expected in 2012, an increase of 26 per cent from 2011.”
So to put it equally politely, comparing the chancellor’s new policy measures with the active government that the country needs ‘leaves a considerable shortfall’.
Or slightly less politely - this is a ragbag mix of previous announcements and ad-hoc handouts without any coherent vision of where we need to move the economy, never mind a plan to get there.
Chi Onwurah is shadow minister for innovation and science, and MP for Newcastle Central
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