Greater devolution is key to delivering growth for the UK, according to the Chancellor of the Exchequer John Healey.

In his first speech as Chancellor at the Manufacturing Technology Centre (MTC) in Coventry, Healey set out plans to devolve taxation to the regions, such as greater business rates retention for local councils and strategic authorities, and a share of local income tax for every mayoral authority from 2028. The Chancellor also voiced his commitment to reducing the regulatory burden on businesses, encouraging innovation and creating jobs.

Healey was also markedly more upbeat than some of his predecessors about the state of the UK economy and the future opportunities for growth, despite his candour about the magnitude of the challenges the country faces.

ICAEW welcomed the sentiment of the Chancellor’s speech, and the focus on growth as a sustainable route to stronger public finances. “His focus on investment, innovation and jobs, alongside measures to unlock infrastructure and spread economic opportunity, is a promising sign,” said ICAEW’s Chief Executive Alan Vallance. 

Encouraging investment

Healey outlined three goals for the Budget in October: to encourage investment, innovation and jobs. 

For investment, Healey announced changes to the Treasury Green Book discount rate from 3.5% to 3%, to skew investment towards projects with long-term potential. Public procurement, he said, will be used as a strategic tool to ensure that the public sector prioritised British businesses.  

More crucially, Healey committed to reducing the regulatory burden by 25% by the end of the Parliament. “The commitment to reduce the regulatory burden by 25% is particularly encouraging,” said Vallance. “Businesses tell us that operating in the UK has become too uncertain, too difficult and too expensive, so this target must translate into practical changes that cut the cost of doing business, reduce the pain points that businesses have to face and make it easier to invest, innovate and create jobs.”

Moving onto innovation, the Chancellor announced the extension of sandboxing powers to allow businesses to test frontier technologies outside of the usual regulatory restraints. He added that he acknowledged some of the risks surrounding the option of AI, including the impact on the workforce. He pledged to strike a balance between economic opportunity and appropriate regulatory guardrails, but without explaining how this will be done. For jobs, he promised to follow the recommendations of the Alan Milburn report into NEETs.

Plans for devolution

In his speech, Healey announced a £150m allocation from the British Business Bank for scale-ups in the north, and the creation of the Northern 500 growth community of northern mid-sized businesses led by the Great North Partnership of Mayors. South Yorkshire, Liverpool City Region, North East England and the Cardiff Capital Region will also become the latest strategic partners of the National Wealth Fund. 

“The National Wealth Fund will get hands-on,” Healey said in his speech. “It'll help these areas build their own investment pipelines. Because I know that strategic authorities are only as strong as the local authorities that compose them, councillors in every nation will remain at the front line of local growth, from house building to high streets. And alongside this, we need a strong strategic center of government wired to enable those local leaders and their ambitions succeeding where old schemes like Leveling Up have failed.”

Healey would not be drawn on any potential tax increases, but stressed that he would stick to fiscal rules and is looking to reduce the government spending and the need to address the welfare bill. Vallance stressed that fiscal headroom should not be built through further business tax increases, particularly as growth is the ultimate goal. “Firms need certainty, simplicity and stability, supported by a credible, long-term roadmap towards a simpler, fairer and more modern tax system. The plans for greater fiscal devolution should also empower local leaders while avoiding additional complexity or fragmentation for businesses operating across the country.”