|BUDGET: MANY POSITIVES, BUT...
March 20 2013.
Commenting on the Chancellor's Budget speech, John Longworth, director general of the British Chambers of Commerce (BCC), said: "There is much for business to commend in the Chancellor's statement, from a wider remit for the Bank of England, to measures on fuel duty, home ownership, and employment. However, many in business will feel that the government could have gone even further to support enterprise and growth - for example, through immediate action on business rates and road maintenance.
"We are at an unprecedented moment in our economic history, and the government should be doing everything in its power to get the economy moving. Many of the Chancellor's measures are positive but may come too late, particularly for smaller and medium-sized companies. We need urgency, scale and delivery today.
"If Britain is in a global race, as the Chancellor said in his speech, our political elite needs to act accordingly, and pull out all the stops to support enterprise, jobs, wealth creation and exports. Business will appreciate many of the Chancellor's measures, and his personal commitment to fiscal discipline, enterprise and infrastructure, but will wish he had been even more radical in the pursuit of growth."
Commenting on the forecast by the Office for Budget Responsibility, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: "The new OBR forecast for 2013 of 0.6% is identical to our own. For 2014/15 the OBR's forecasts are still realistic, only marginally higher than our own. However we believe that the OBR's forecasts for growth beyond 2015 may be too ambitious, as it is hard to envisage UK growth consistently above 2.5%.
"The OBR has confirmed that restoring stability to our public finances will take longer than expected, and that public sector debt as a percentage of GDP will only start declining in 2017/18, two years later than planned in 2010. Nevertheless, the Chancellor's efforts to switch resources from current to capital spending, and continuing with deficit reduction, are on the right lines.
"The Chancellor's announcement of a more flexible monetary policy framework will offer some welcome transparency regarding the actions of the MPC, and we will examine the detail carefully. At a time when fiscal policy is squeezing demand, it is right to rely on expansionary monetary policies as the UK has done since 2008. However, it is important that changes to the monetary remit do not give the impression that the MPC will tolerate higher inflation for prolonged periods as this could be damaging in the long-term."
FURTHER COMMENT FROM JOHN LONGWORTH ON SPECIFIC MEASURES IN THE BUDGET
On fiscal policy and government spending:
"The Chancellor has tried hard to shift spending towards growth, with some success. However, the Coalition as a whole should have taken the tough political decision to remove ring-fences around health, overseas aid and universal benefits, which would have allowed more immediate investment in road maintenance, house building, business access to finance and support for exporters.
"The business community will welcome the Chancellor's move to re-direct money from government departments to infrastructure over the medium term. However, businesses would have liked to see an even bigger shift in government spending towards priorities that unleash enterprise, which in turn delivers jobs, prosperity and the tax revenues needed to shrink the deficit and eventually the national debt."
On 'monetary activism' and a new remit for the Bank of England's Monetary Policy Committee:
"We welcome the Chancellor's decision to review the Monetary Policy Committee's remit, and to give it more latitude to support growth. We will look at the tweaked remit in detail, but the principle of targeting inflation while doing everything possible to support growth is right."
On business rates:
"Companies across the country are crying out for relief from relentless annual rises in business rates for years, but the Treasury has put off action until the Autumn Statement. Unless a business's premises are the size of a double garage, or if a firm is building speculatively over the next two years, there's little relief on offer.
"Heavy taxes on inputs like property drag down business profitability. We urge the Chancellor to take further action on business rates without delay."
On employment and the new Employment Allowance:
"The Chancellor's move to help our smallest companies take on staff by cutting their employers' national insurance bills by £2,000 will give many businesses an important boost of confidence. Small companies should be able to focus on growth rather than worry about getting hit by employment taxes."
On Growth Vouchers:
"The British Chambers of Commerce proposed a voucher scheme to help businesses access growth advice in September 2012. We are pleased that the Chancellor has accepted our proposal and committed £30m to help companies around the country get the advice they need to grow, on their own terms. Chambers of Commerce around the country look forward to working with the government to bring the scheme to life - and enable businesses to get the specialist assistance they need, whether on finance, employment law, or other areas.
On business access to finance:
"BCC has long campaigned for the establishment of a business bank, and for it to be of sufficient size and scale to provide the sort of support to new and growing businesses seen in Canada, the USA, Korea, and Germany. A British Business Bank requires a vision and proper resourcing. Unless it has both, it can't back the dynamic companies that have failed to get patient growth capital in this country for decades.
"While we will await further detail on the business bank's start-up activities, we would have liked to have seen a radical increase in the initial funding on offer. The Chancellor has, however, given greater flexibility to the Bank of England to support growth. So we will urge the incoming governor of the Bank of England to underwrite or capitalise the business bank using the BoE balance sheet."
Funding for Lending:
"The Chancellor mentioned that the Treasury are working on improvements to the Funding for Lending scheme, which has helped the mortgage market but has done little or nothing to solve the issues businesses face when trying to access finance. While will we support any idea that could help boost the scheme's effectiveness for business lending, Funding for Lending can ultimately do little beyond lowering the cost of finance for companies already considered by banks to be 'safe bets'. Only greater competition in the banking sector and a properly capitalised Business Bank, which would drive up appetite for risk, can deal with the very real frustrations we see in the business community across the UK."
On housing and the mortgage market:
"The Chancellor's efforts to grease the wheels of the mortgage market are significant and positive. However, we argue that moves in the mortgage market should be complemented by direct support for the building of new houses. Direct support for construction creates jobs and supply chain activity, and boosts business confidence fast."
On transport infrastructure:
"Business appreciates the Chancellor's personal commitment to improving Britain's transport infrastructure - and his efforts to reverse the damaging cuts to transport spending that we warned all parties against. His £18bn shift from current spending to capital investment over the next Parliament is welcome. However, by its very nature, the switch announced in the Budget will only have an impact in the medium-term.
"As part of a wider re-prioritisation of resources on measures to boost confidence, jobs and growth, the Chancellor should have gone even further and used this Budget to divert unproductive current spending into road maintenance and repairs today. This would have had immediate effects on business confidence, construction sector jobs, and the effectiveness of our transport network."
On energy infrastructure:
"We welcome the Chancellor's commitments on energy, as they contribute to our overall energy security and resilience. We hope these announcements, together with the confidence generated by planning permission for new nuclear, will reduce the political risk that has dogged private investment in energy infrastructure.
"What's more, we need to get more creative to de-risk investment in these major projects. The Bank of England could play an important role here, by offering guarantees that help to de-risk infrastructure investment for pension funds, institutions and sovereign wealth funds from across the world."
On international trade and export support:
"If Britain is in a global race, as the Prime Minister is so fond of saying, we must pull out all the stops to support our exporters.
"While we welcomed the Chancellor's commitment of new funds to support trade promotion in the Autumn Statement, and are working closely with the government to boost assistance to exporters, more can still be done to turbo-charge export support for British companies. There is a need to provide even more practical help in overseas markets for companies wanting to export."
On corporation tax:
"All companies will cheer the news that Corporation Tax will fall to 20% by 2015. This is an important fillip to business confidence, particularly among global investors.
"The Chancellor may, in future, need to consider even further tax cuts of this nature if there is no sign of resurgent growth over the coming months."
On public sector pay:
"The Chancellor is right to restrain public sector pay, especially in light of continued pay restraint in hard-working businesses across the UK."