The Budget and what happens next

First things first – after months of engagement on the future of Capital Gains Tax and the treatment of ‘carried interest’, these issues were notably absent from the Chancellor’s Budget this week. Instead, the business focus remained on support for the recovery and plans for Corporation Tax (which will undoubtedly spark separate debates in the months to come).
The BVCA (members and executives alike) have been strongly focused on CGT/carry since July last year when the first official consultation began, so this was a welcome outcome – for now. We are very much alive to the fact that on 23rd March a series of consultations will be announced on the future of tax. Should any of the reviews touch on these particular areas we will continue to engage extensively, building on the platform of our technical work and the wider stakeholder positioning, as most recently set out in our New Horizons report.
In the meantime, thank you again for the teamwork and support which enabled us to put the best case forward on these issues in recent months.
More broadly, the Budget illustrated in stark terms the impact of COVID over the past year. The health emergency remains the top priority of governments around the UK, but close behind are the state of the economy and the impact on the UK deficit. The need to re-boot the economy in the short term while looking to repair the public finances in the medium term requires a delicate balancing act.
To illustrate the scale of the challenges facing the Chancellor, his quick canter through some key numbers brought it home: a 10% decline in GDP in 2020, an historic (for all the wrong reasons) deficit of £355bn this year and an economy which will still be 3% smaller than it would otherwise have been in 5 years time. Stark does not do justice to the outlook.
Nevertheless, there were strong signals about the vision the government has for the future – as our February edition of Policy & Technical Update sets out, with the fintech and UK listings reviews on the one hand, and the consultations on R&D credits and Enterprise Management Incentives on the other, we have welcome evidence of those ambitions. And specifically for venture, the next developments in the Future Fund are important to watch, too.
In the New Horizons report we set out the key policy priorities of the Government where the private equity and venture capital industry is well placed to support them – the economic recovery, levelling up, boosting UK competitiveness and climate/ sustainability.
Each of these themes was woven into the Chancellor’s statement this week and we therefore have a strong platform from which to engage with him and his colleagues (as we will across the political spectrum) to show how we can generate ‘public value’ for the country based on an internationally competitive investment environment.
So, alongside our work on the future of the industry’s tax, legal and regulatory frameworks, we will be articulating the industry’s ‘manifesto’ of policy ideas to enhance the contribution we can make.
The upshot of all this is that the BVCA intends to keep focused and busy on your behalf.
Michael Moore,
Director General, BVCA