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The response of the business community to the
spending review was largely positive, acknowledging the requirement
to tackle the budget deficit.
But questions remained over the absence of a clear
strategy for growth.
With some 490,000 public sector jobs to go over the
next four years, the onus will be on the private sector to generate
additional employment.
For this to happen, some business groups insist that
the government must play its part.
"Business has been clear: the deficit must be
tackled, no matter what," said David Frost, the director general of
the British Chambers of Commerce (BCC). "The spending review does
the job of setting out how this will be done.
"Overall, the 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 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.
On training, the BCC said it understood that
government skills subsidies had to be cut back but urged that the
remaining funding be focused on providing people with the skills
needed to get into work. Until that happens, UK firms will continue
to highlight skills shortages as a barrier to growth.
The BCC also lamented the hit taken by the budget for
export promotion. "This should be one of the Government's top
investment priorities, yet the 25 per cent cut in funding for UKTI
programmes that deliver direct export support to businesses on the
ground is not good news," commented Mr Frost. "British companies
will be left in a weaker position compared to their competitors from
other major trading nations."
On local regeneration funding, the BCC took comfort,
amidst the substantial cuts, in the fact that the government is
still committed to Tax Increment Financing and that more provisions
would be made available to the Regional Growth Fund.
Encouraging small business growth was the main focus
of the Federation of Small Businesses (FSB).
The FSB welcomed measures to increase the number of
adult apprenticeships by 50 per cent to 75,000 new apprentices a
year, as well as the £530 million directed from the government and
the BBC to put in place superfast broadband pilots.
However, the business group said it believed that the
missing link in the government's deficit programme is the need to
create growth, increasing the tax base, and incentivising small
firms to innovate.
For that reason, the FSB called for an extension to
the national insurance contributions holiday to include existing
firms with up to four members of staff and to offer incentives when
firms take on three new employees.
In addition, the FSB wants to see a cut in VAT to 5
per cent in the construction sector, a cut to £500 million in the
business support budget but with a greater concentration on micro
businesses, and a business-led national mentoring service.
John Walker,
the FSB's national chairman, said: "We all know we are living in an
age of austerity and that these cuts will affect us all. But our
members understand that to reduce the public sector deficit, these
cuts had to be made.
"The small business community continues to have a
vital part to play in driving a credible recovery and taking on new
members of staff to help tackle unemployment, so it is now vital the
Government puts a programme for growth into action immediately. As
our research shows, small firms are at tipping point and lack the
confidence to take on the 500,000 people that will be made redundant
as a result of these cuts."
The Forum of Private Business (FPB) highlighted moves
in the review to create an even playing field on tax for small
firms.
Government cuts include a requirement for HM Revenue
and Customs to find savings of 15 per cent via new technology and
other efficiency measures, and the FPB backed the reforms providing
they save money for small businesses.
Other tax moves include investing £900 million in
tackling tax evasion and fraud in order to claw back £7 billion in
lost tax revenues.
Jane Bennett, the FPB's head of campaigns, commented:
"Some of the announcements on taxation were welcome, but for too
long large companies have been able to exploit tax loopholes.
"This simply has to stop if SME growth and job
creation is to drive sustained economic recovery. The government
should clarify that, in addition to tackling tax evasion, clamping
down on tax avoidance by large companies as well as financial
institutions will be in its sights."
Referring to the decision in the Budget to cut small
companies' corporation tax by a lower margin than large company tax,
Ms Bennett added: "At the very least we want to see the lower rate
of corporation tax reduced at the same level as the big business
rate.
"But even if combined with a shake up of other cost
barriers such as red tape and late payment this will not be enough
to significantly stimulate small business growth and create the
private sector jobs required following the 490,000 lost in the
public sector. Bolder, more radical policies on tax and other
barriers to small businesses must be introduced alongside these
efficiency measures."
The FPB called for an extension of the national
insurance holiday given for the first 10 staff recruited by new
start ups beyond a year and giving a similar break to established
non-employers.
Miss Bennett also suggested reviewing supplementary
business rates and other local taxes in development - such as
workplace parking levies - ensuring they are introduced only with
support of the local business community.
Richard Lambert, the director general of the CBI,
said that the Chancellor had got the strategic direction of the
spending review right and had stayed the course outlined in the June
Budget.
Mr Lambert continued: "We particularly welcome the
extra £2 billion a year on capital spending, and the focus on areas
that support growth. These include transport and other
infrastructure, education and science, and the low-carbon economy.
"The spending cuts, though painful, are essential to
balance the UK's books and build its future prosperity. Now the
government must deliver its promised savings by re-engineering
public services."
On the science budget and apprenticeships, the CBI
said: "The 75,000 extra apprenticeships will help re-skill the UK's
workforce, and adult apprenticeships are especially relevant for
employers. And welcome the decision to freeze the overall science
budget, and the government's announcement that it will look for ways
to improve how various funding streams operate." |
