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Chancellor could have done more to support business confidence and growth
Wednesday, 21st March 2012
Commenting on today’s Budget, Clair Prosser, Policy Executive, Thames Valley Chamber of Commerce said:
â€œNever has there been a more important moment for the government to focus on British business and long-term, sustainable growth. The Chancellor’s commitments to contain the deficit and reduce corporation tax will be welcomed warmly by business. However, many small- and medium-sized companies will feel the measures overwhelmingly benefit the biggest businesses. Smaller firms will be disappointed George Osborne did not do more to support confidence and growth in the real economy.
â€œWhile there is a 1% cut in Corporation Tax, companies will still be hit with a 5.6% rise in business rates from April. In addition, businesses face lower allowances for investment in new plant and machinery in most areas, and will see no further incentives to create employment, particularly for young people. And while the Chancellor has reduced the cost of borrowing for some businesses, the problem of accessing finance in the first place remains, and will become more acute as the economy begins to grow.
â€œThe Chancellor reiterated promises on reforming infrastructure, planning, employment law and boosting exports, which will provide enterprises with some reassurance. Business needs to see radical and meaningful delivery of these measures, from the overhaul of transport and broadband networks, to helping firms look for new markets overseas.
â€œThe Chancellor today reasserted a real commitment to prudence. He also made an important rhetorical commitment to business growth. But weâ€™ve heard much of this before. In the coming weeks, actions will speak louder than words.â€
However there were some positive announcements for the Thames Valley:
â€¢ Reduction in Corporation Tax – to encourage investment in jobs, equipment, services
â€¢ Incentives for creative industries, scientific research and aim for the UK to become a centre for technology supported by the right infrastructure
â€¢ Plans to encourage small businesses to export to emerging markets.
â€¢ Confront air capacity issues in the South East and produce a plan to examine this
â€¢ Commitment to roll out high speed broadband, increased coverage to rural areas to 90% of population
For further comment on specific Budget measures see below
Commenting on the new forecast published today by the OBR, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:
â€œWe agree with the broad thrust of the new OBR forecast, although it is still slightly too ambitious. We share the OBR’s view that the UK economy returned to positive growth in the first quarter of 2012, and that there will be no double-dip recession. Growth will gradually improve from the middle of this year, and improve further in 2013 and 2014. However, more weight should be given to the risks of a setback in the eurozone and to possible distortions that could result from the Diamond Jubilee and the Olympics later in the year.
â€œWe expect growth of 0.6% in 2012 and 1.8% in 2013, while the OBR predicts 0.8% and 2.0%. Furthermore, we believe that the OBR’s predictions for UK unemployment are still too low. The OBR expects the jobless rate to increase to only 8.7% of the workforce, while we expect it to reach 9%, given the time it will take for the private sector to absorb job losses in the public sector. We agree with the OBR that the deficit reduction plan is on course, and that the government should achieve its aim of eliminating the deficit around 2016.
â€œIt is disappointing that British businesses were not given much help with cost pressures, such as the planned rise in business rates that should be scrapped. This is unsurprising though, given the higher than expected borrowing figures for February. We do, however, support the decision to finance additional tax cuts by introducing more spending reductions elsewhere. This will improve the competitive and productive potential of the UK economy.â€
Commenting on today’s Budget, John Longworth, Director General of the British Chambers of Commerce (BCC), said:
On business rates:
â€œThe Chancellor could have used today’s budget to offer real relief to businesses struggling with next month’s 5.6% rise in business rates. Action to stop the great business rates robbery would have given many small- and medium-sized firms much greater confidence to invest and hire.â€
On credit easing:
While credit easing is a step in the right direction, it is not a panacea for all the problems faced by businesses trying to access finance. The National Loan Guarantee Scheme will make some loans more affordable. But it will not help the smaller, younger, and high-growth firms that have trouble getting credit in the first place.
On the 50p tax rate:
“Business has long said that the 50p top rate of income tax is a disincentive to enterprise, to wealth creation, and to investment here in the UK. Most hard-working businesspeople will be glad to see the back of this counterproductive tax rate.
On Sunday trading:
â€œThe government is right to make sure the UK economy sees the maximum benefit from the influx of tourists this summer for the Olympic and Paralympic Games. Longer opening hours will ensure retailers can benefit from tourist trade. This eight week period will serve as a useful trial to provide evidence as to whether the relaxation of Sunday trading rules on a permanent basis would provide a boost to the economy in the long term.â€
â€œThe BCC welcomed the Prime Minister’s announcements on road investment earlier this week, and we are pleased to see progress has been made in encouraging the UK’s pension funds to invest in UK infrastructure. However, this must be scaled up significantly over the coming months, and investments must be made swiftly in key projects in order to benefit business, growth and inward investment.â€
â€œWe have long championed the importance of the Northern Hub project, which will see capacity and speeds increased between Manchester, Sheffield, Bradford and Preston. The Chancellor’s announcements on this are welcome, but the government should go further and commit to funding the project in full. Only then will the real benefits start to be felt.â€
â€œThe Chancellor was right to acknowledge aviation capacity constraints in the South East. However, business will be hugely disappointed that publication of the Aviation Policy Framework for the whole of the country has been delayed until the summer. For all the government’s rhetoric, continued delay risks leaving the UK at a competitive disadvantage to its global trading competitors. While Britain dithers, others do.
We have long said that Air Passenger Duty is a significant burden on the business community, who need to fly to access markets and trade goods with the world. This is why we are disappointed to see the government press ahead with its planned double inflation rise from April. We are, however, pleased to see that the Chancellor is devolving the power to set the rate of APD in Northern Ireland to the devolved Assembly.â€
â€œThe evidence from good businesses trying to expand consistently shows that the UK planning system is a brake on growth and jobs. The Chancellor is right to tackle the complexity, cost and inconsistency of the planning system and must not retreat from his commitment to radically simplify the planning system when he publishes the new National Planning Policy Framework next week.â€
On youth employment and enterprise:
â€œWe are disappointed that the Chancellor did not announce additional measures to incentivise businesses to employ more young people. While the freeze in the youth rate of the National Minimum Wage is a welcome step, an extension of the Youth Contract would have encouraged more companies to take on and train young people seeking to break into the world of work.
â€œWe strongly support the Chancellor’s proposal to pilot a youth enterprise loan scheme, using a similar model to the student loan system. Young people wanting to jump into the world of business, rather than attend university, deserve support to make their ideas a success. Chambers of Commerce up and down the country stand ready to help mentor young people who want to take the leap into business and access this support.â€
On incentives for local growth
â€œThe announcements of Tax Increment Financing in England and new capital allowance provisions for Enterprise Areas in Scotland and Wales, after long and protracted delays, are very welcome. In the coming weeks, Ministers must focus on ways to create even more incentives to invest in these zones – and help businesses to power local growth in all areas of the country.â€
On support for exporters:
â€œWe are reassured by the Chancellor’s commitment to do more to help companies secure trade finance, and are working closely with UK Export Finance to ensure that all businesses that want to trade overseas get the help they need. Chambers of Commerce are the first place many businesspeople go when they start to trade internationally.â€
On Enterprise Finance:
â€œThe Business Finance Partnership and Enterprise Finance Guarantee are both schemes that can help businesses access finance, and the Chancellor’s announcement to expand them is a step in the right direction. It is important to remember, however, that the practical implementation of these initiatives will be the true test of their success. Finance products designed in Whitehall need to be rolled out effectively across the UK, and communicated effectively to businesses and investors, if they are to create real benefits.â€
On the State Pension Age:
â€œBusiness will support automatic reviews of the State Pension Age, rather than the ad hoc rises that we have seen in the past. Employersâ€™ main concern, however, is the vacuum that was left when the Default Retirement Age was removed in April 2011. As the State Pension Age rises further, this issue will only increase for companies across the country.â€
â€œThe single-tier pension announced by the Chancellor will make it clearer to individuals that private saving will benefit them in retirement. From October 2012, firms will begin auto-enrolling staff into pension schemes. This measure will give employers confidence that their contribution will not just subsidise the government’s means tested top-up, but will genuinely enhance the retirement of their employees.â€
Chamber Press Office