Spending Review: Government must now shift gear from cuts to a clear growth strategy

Wednesday, 20th October 2010

Commenting on the Spending Review, set out by the Chancellor of the Exchequer today, Claire Prosser, policy executive, Thames Valley Chamber of Commerce, said:

“Business has been clear: the deficit must be tackled, no matter what. The spending review does the job of setting out how this will be done.

“Overall, the Spending Review could have been worse for business. While we were disappointed that the Government succumbed to political ring-fencing of some spending areas, cuts to productive infrastructure investment were not as bad as many had feared.

“Now that the Spending Review is complete, our message to Government is that it is now time for a clear strategy for growth – which in turn will give companies, and especially small and medium-sized enterprises, the confidence to invest. Perceptions matter. Businesses and government must work together to deliver a real year for growth in 2011. This is the only way that the private sector will be able to take up the slack.”

Infrastructure / capital spending
“Business leaders have argued consistently that investing in roads, railways, the energy grid and broadband will help companies drive growth and jobs.

“While we are disappointed that net investment will fall over the next five years, the Government has today made some important commitments to transport that will help improve business confidence. We are particularly pleased to see an unequivocal nod to Crossrail (of particular interest to east Berkshire) and a number of road and rail improvements that will help regional economies across the UK. Business has high expectations for the National Infrastructure Plan due to be announced next week. Without a clear, cross-party strategy for long-term infrastructure investment, the UK will continue to lose competitive advantage.”

Public sector jobs
“The current level of public sector employment is unsustainable. The private sector saved jobs in the downturn through wage bargains and agreements between companies and employees. Is the public sector ready to follow suit?”

Training and education
“Employers understand that Government subsidies for in-work training will be cut back, and accepts the tough decision to axe Train to Gain. However, they say unequivocally that remaining funding must be focused on providing people with the skills needed to get into work. Too many businesses still feel that job candidates lack the basic skills needed to make them employable. Until we sort this, Britain’s companies will continue to highlight skills shortages as a barrier to growth.”

Business support
“There are still a number of unanswered questions around the business budget – notably around support for exporters and schemes that help both new and existing businesses to grow. Further clarity is still required.”

Support for exports
“It is disappointing that the budget for export promotion has taken such a substantial hit when politicians say they want a rebalanced UK economy. This should be one of the Government’s top investment priorities, yet the 25% cut in funding for UKTI programmes that deliver direct export support to businesses on the ground is not good news. British companies will be left in a weaker position compared to their competitors from other major trading nations.

“It is also imperative that more resources are dedicated to promoting British business overseas through embassies and representations – as the Foreign Secretary suggested last week.”

Defence
“Let’s not forget that defence spending creates jobs in supply chains up and down the country. The Government has struck a difficult balance between cuts and maintaining investment in high-tech jobs that deliver real benefits to a number of local economies.”

Local government and regeneration
“It has been clear for some time that local government would take a significant hit in the spending review. We will work closely with councils across the Thames Valley to ensure that economic development and regeneration continue. We welcome, for example, the Government’s commitment to Tax Increment Financing, and the announcement that resources have been found for a third tranche of the Regional Growth Fund.

“It is critical for Government to set out a vision for growth in the regions. Business will play a key role, providing leaders for Local Enterprise Partnerships. But these partnerships must be enabled to knock down barriers, such as planning processes and regulation, which stop companies from investing.”

Public and private sector pensions
“Business recognises the need for the state pension age to rise to 66 by 2020 to fund ever-longer retirements. Businesses will still be concerned that with the default retirement age being scrapped next year, their workforce planning abilities will be reduced – and that there will be a rise in costly employment tribunal claims.’

“The Government must follow through on Lord Hutton’s initial recommendations regarding public sector pensions. Increased employee contributions alone will contribute to £1.76bn of savings by 2014/15. Further change is required to ensure that future liabilities are reduced.”

Welfare reform
“Business has no argument with the Government’s view that work should always pay, and that benefits cannot be a long-term solution. Employers want to take on local people, but all too often we hear that they’re better off staying on benefits.

“The key issue is to enable the private sector to create enough jobs to help the millions of unemployed and inactive people get back into the world of work. We must answer the question of where the jobs will come from, especially with over a million people already working part-time who want to go full-time. To create new employment, we need to cut red tape and give businesses the confidence to hire.”

Energy and environment

“The announcement of £1bn in funding for a Green Investment Bank is of interest – but business will wait to see how the bank is structured, how it will operate, and whether it can really lever in the investment required in sustainable energy and transport projects.

“The Government has already announced its preferred sites for new nuclear power plants. Britain’s energy security is at stake. The Government must continue to promote investment in nuclear and renewable generation – so that business investors still see the UK as a place to grow.”

Ends

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