The Budget ‘Day’ fallacy and why ‘winners’ should be careful what they wish for
March 3, 2021 • 4 minute read
A set-piece fiscal event like the Budget is a clear harbinger of change. Change, intentionally or not, always creates winners and losers. And with that comes communications considerations for companies to keep in mind.
First, while certain measures will grab the headlines, look at the whole picture, including the short- and long-term implications of what has been announced. Short-term losers might be long-term winners, or vice versa, while some ‘wins’ will be offset by ‘losses’ elsewhere.
Second, don’t be tin-eared. Winning and losing is all relative. Does the future increase in the headline rate of corporation tax really render you a ‘loser’ compared with the single parent who faces a cliff-edge loss of £20 per week when extended universal credit support ends?
Acknowledge, too, that the Budget cannot deliver wins for everyone, especially with the volume of Covid support that must be repaid. Consider the broader environment.
The policymaking protocol for recent fiscal announcements seems to involve a staged process of media leaks to gauge initial reaction before making a formal announcement. Last week’s ‘spend now, tax later’ Budget was no different – its contents were widely trailed beforehand, allowing plenty of time for reaction to be agreed and communicated.
The ‘Budget Day’ fallacy
Paul Johnson, Director at the Institute for Fiscal Studies, described it as a “tale of two Budgets”, while former civil servant Jill Rutter commented in The Times that “we used to talk about Budget days. But now it seems to make more sense to talk about Budget weeks. Or months.”.
Everybody reacts to the Budget (just ask any political or economics reporter about the inbox inundation the Budget brings), but how should you react, at least publicly?
Silence is often the loudest response. As our recent Tax and Reputation report indicates, those that push back the strongest against policy decisions risk becoming inextricably linked to a certain measure. Think of Amazon’s position as a media poster child for stories on corporate tax affairs, or the Diverted Profits Tax being nicknamed the ‘Google Tax’. Do you really want to become the ‘brand’ for a particular tax policy?
National newspapers were quick to make similar links following the Budget announcement around the new ‘super deduction’, which allows companies to offset spending on plant and machinery. The Telegraph (Amazon to be among winners of UK tax ‘super-deduction’ – March 3) and The Guardian (Amazon could be a big winner of Rishi Sunak’s investment tax break – March 4) pointed out that the company could even wipe out its UK tax liability entirely, through the super deduction. This is a clear ‘win’ from a financial perspective, but in the current climate that’s not a good look in the court of public opinion.
All of which raises the question of ‘fairness’ – even if there was only one passing reference to tax avoidance and evasion in the Chancellor’s speech. Budget ‘winners’ who have been the recipients of government support scheme cash during the pandemic must take extra care in managing how this is perceived.
Amazon, wisely for its part, is staying schtum – and who can blame them? Being a lone voice can put you in an isolated, exposed and unloved place.
Attention now turns to March 23 – dubbed ‘Tax Day’ – when a raft of consultations and calls for evidence are to be published. It’s another chance for all stakeholders – from individual taxpayers to corporates – to scrutinise and influence policy proposals.
Recent history suggests they would do well to stick together and coordinate their response carefully, alongside other industry voices.
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