The government's contentious mini-budget announcements have been met with a lukewarm reception by adland with some positive impacts on business, but plenty of concern about the longer-term impacts on society.
On Friday, the chancellor Kwasi Kwarteng unveiled a sweeping range of measures that the Liz Truss government is betting will stave off a deep recession and, ultimately, deliver economic growth that the UK has been sorely lacking over the past decade.
The key policy announcements for businesses include:
- A six-month energy cap to help businesses tackle soaring prices through winter
- Scrapping next year’s corporation tax rise from 19% to 25%
- Removing IR35 rules to make it easier for businesses to hire contractors
- A reversal of the 1.25% national insurance hike rolled out in April
- Low-tax investment zones across regions to encourage investment
Kwarteng also rolled out changes for the public, including:
- An energy cap for households to insulate them from price hikes
- Scrapping the 45% additional rate income tax band for those earning more than £150,000
- Reducing the basic rate of income tax from 20% to 19%
- Reversing the aformentioned national insurance hike
- Removing the cap on bankers’ bonuses
The Institute of Fiscal Studies forecasts government borrowing will rise to £190bn this year, which includes the largest package of tax cuts in 50 years.
The mini-budget announcement has spooked the markets with the pound plummeting against (a relatively strong) US dollar to $1.03 – its lowest level on record – before recovering to $1.07 at the time of writing.
The Labour Party has criticised the mini-budget as "reckless", "casino economics" and one that favours the ultra-rich over most British workers. Other critics have expressed concerns about whether the package would deliver growth, or drive further inequality.
But what does the package mean for adland?
Campaign asked leaders from media owners and agencies (creative, media and digital) to gauge what they make of Trussonomics.
Rania Robinson, chief executive and partner, Quiet Storm
There was no "mini" about Kwarteng’s "fiscal event" on Friday. The biggest tax cuts in 50 years have fired up political divisions and fuelled intense debate, not least in adland. There were certainly some welcome changes, for example the reversal on increases in NI and the cancellation of the rise in corporation tax.
However, for an industry that relies heavily on consumer confidence and growth, how much real difference will this mini budget make? While tax cuts and energy caps will help with consumer confidence, it’s clearly the higher earners who will benefit the most, leaving the broader populace still struggling with the cost of living.
Fundamentally it comes down to the words on everyone’s lips – trickle-down economics. Truss and Kwarteng insist this is the only path – but if you look at historical data there’s no real evidence behind the theory. But rather that it remains in the hands of the already wealthy creating an even bigger divide.
So, if the recession comes, it won’t be equal – Londoners could still do very well. The ad market might lose its middle but there could still be value-driven spend at one end and luxury spend at the other. An uncomfortable silver lining.
Phil Hall, joint managing director, Ocean Outdoor
Out of home is a predominantly fixed-cost business and, along with everyone else, our industry has faced significant pressure from rising energy costs.
However, whilst the past few years have been far from easy, the industry has taken a long-term view and continued to invest in new sites, innovation and, of course, a more sustainable product. This comes at a high cost and as such the measures announced in the mini-budget are welcomed.
It’s important to remember that a thriving OOH industry benefits our economy in a number of ways. The improved quality and reach of the medium benefits advertisers spending their budgets and stimulating our economy.
Local authorities are major beneficiaries, with an estimated 50p in the £1 of OOH revenue funding local amenities and services. And we pay tax, of course. I have no doubt that any benefits derived from the mini-budget will be invested in the further strengthening of the digital OOH product, creating a virtuous circle for the OOH industry, clients and taxpayers.
Chris Gilfoy, head of strategy, the7stars
In a recent survey on British social attitudes, only 6% of people said they’d like to see a reduction in taxes. A whopping 52% said they’d increase them. Awkward.
While the average Brit won’t be noticeably better off as a result of the mini-budget, there are some short-term upsides from the freeze in energy prices. And although bills are higher than in previous years, this is softened by healthy employment. This may lessen the consumer caution that pundits have been predicting, but mostly in smaller-ticket spending – the oft-mentioned "lipstick effect". Something for brands battling "trading down" to consider when planning investment.
In the short term, we could see stamp duty savings benefitting home furnishing and DIY brands, and the few who benefit from high-earner tax cuts or relaxed banking bonuses should give the premium end of most markets reasons to invest in growth.
From a business perspective, there’s good and bad. Energy price caps and corporation tax changes will bring some reduction in cost-pressures, but the hoped-for changes to business rates didn’t happen, with high street firms facing an £800m rise next year under already trying circumstances.
Richard Morris, chief executive, UK & Ireland, IPG Mediabrands
We naturally want a growing and healthy economy for the prosperity of our people, our clients and our business. The economic impact of the pandemic will last for years, while the pressure on energy prices exacerbated by the war in Ukraine creates a dire picture for many millions in the UK. Desperate times, desperate measures? Well in that regard, Truss and Kwarteng were on point. The tax cuts and other economic measures announced on Friday were without precedent and an extreme example of free-market economics.
Radical new measures delivered by a new prime minister and new chancellor all speak of a gamble. The initial reaction of the currency markets is of major concern, and those opposed saw them as driving greater inequality across the UK population and driving up inflation.
But such measures are without precedent, so it is not yet possible to gauge whether they are the right ones to bring the UK economy back to growth as quickly as possible (whenever that is). The reality is that something brave was required, but it remains to be seen whether Friday’s measures were brave or just reckless. We will have to wait and see.
Tom Skinner, co-founder, Go Up
Friday's mini-budget felt a bit like being told that you could open your presents before Christmas Day. But not just one or two on Christmas Eve – the whole lot. On Bonfire Night. Great for Bonfire Night, but you know you'll regret it once Christmas rolls around.
There's no doubt that in the short term the announcements are "good" for business and will have employers smiling, but you can't help but be left with the sense that a new Conservative government is opting for crowd-pleasing headlines and short-term economic stimulus over dealing with the elephant in the room: paying for – amongst other things – the Covid relief measures and the recent energy bill caps.
Nevertheless, we're curious to see how we might feel about these measures. Some benefits are obvious: reduced income tax means our hardworking team take home more of their pay; the threat of increasing corporation tax stifling any motivation to post higher profits is gone. But what will it mean for our clients – or potential clients? As a marketing agency, our bottom line is very sensitive to general economic confidence.
Unfortunately for us, the reality is that marketing budgets are one of the first things to get cut when businesses see a storm on the horizon, and we've been noticing this nervousness from clients and prospects for at least six months now. Might these measures create enough of a sense (actual or perceived) of economic wellbeing to persuade our clients to grab the bull by the horns and press the big green button marked "Growth"? We hope so.