BCC Budget speech reaction

Responding to the Chancellor of the Exchequer’s Emergency Budget, David Frost, Director General of the British Chambers of Commerce (BCC), said:

“The Chancellor faced two challenges in today’s Budget: delivering a clear plan for deficit reduction and setting the stage for business to lead the UK’s economic recovery.

“We believe that the Government’s decisive moves to cut the deficit will have positive effects on business and investor confidence. Even more importantly, the Chancellor’s message that Britain is ‘open for business’ will be welcomed by companies the length and breadth of the country – and across the globe.”

Commenting on the main macro-economic points in today's Budget, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

“Today's Budget could be a defining moment in Britain's economic history. If successful, the Chancellor’s plan could put the UK on the path toward a sustainable recovery. The huge scale of the spending cuts, and the decision to implement them at an accelerated pace, could increase the risk of a double-dip recession. But, given the threats to our credit rating, the Government is right to proceed at this stage with a bold and aggressive deficit-cutting programme.

“However, we believe that the Office of Budget Responsibility’s growth expectations are still too optimistic, both for the global economy and for the UK. The serious problems facing the Eurozone could have serious adverse effects for the UK economy, and it is not clear these have been fully factored into the new forecasts. Additionally, the OBR's forecast that UK unemployment would peak this year at 8.1% appears much too optimistic given the high level of inactivity in the economy and the expected falls in public sector employment.

"In spite of all these qualifications, the Budget presents a courageous and forceful plan to re-balance the UK economy towards productive private-sector businesses. Companies and policy-makers will all hope that it will help to secure sustainable medium-term growth"

Ends

Media Contact:

Sam Turvey
Tel: 020 7654 5813
Email: s.turvey@britishchambers.org.uk

Notes to Editors:

Further comment from David Frost on specific policy decisions

ON DEFICIT REDUCTION:
“Businesses have been looking for a clear plan for deficit reduction for some time. They will welcome the balance that has been struck – with the lion’s share of fiscal consolidation coming from spending cuts rather than increased taxation.”

ON CORPORATION TAX:
“90% of the businesses we surveyed this month were supportive of a reduction in the headline rate of corporation tax. It is particularly welcome that the small companies’ rate will be reduced to 20% from next year. The business community will also welcome the four-year plan to reduce the headline rate for large companies to 24% - as this will help make our tax system more competitive internationally.”

ON CAPITAL GAINS TAX:
“The BCC opposed changes to the Capital Gains Tax system that penalized investors. However, we believe the Government has made some sensible compromises in its approach, such as the significant increase in Entrepreneurs’ Relief and the maintenance of capital gains tax allowances.

“The Chancellor has tried to steer a course between retaining simplicity and tackling avoidance, and he has appeared to have succeeded in this aim. The proposal to increase the capital gains rate from 18% to 28% for individuals seems a reasoned response. We will watch closely, however, to see if this change has an impact on investor confidence.”

ON NATIONAL INSURANCE CONTRIBUTIONS:
“The BCC lobbied hard to roll back the rise in employers’ National Insurance planned for next year. While we are pleased that the Government has taken the sting out of the rise by raising payment thresholds, some employers across the country will still be worse off from April 2011. We would urge the Government to go further – and eliminate the whole of this unwelcome tax on jobs.”

ON THE RISE IN VAT:
“Our members were clear that VAT was the ‘least worst’ tax rise they could face. While the rise will inevitably affect businesses and consumption, we are pleased that the Government has put off the increase to 4th January 2011 – exactly what we called for when the main rate rose earlier this year. A few days’ delay after New Year gives businesses time to adjust.”

ON CANCELLATION OF UNFAIR BUSINESS RATE BILLS:
“Chamber members doing business in the country’s port areas will celebrate the cancellation of unfair back-dated business rate bills. This is a major win for Chamber lobbying and will support our drive to grow our ports – in anticipation of increased international trade and exports in future.”

ON CAPITAL SPENDING:
“Chambers of Commerce have vocally supported continued investment in infrastructure – which underpins productivity and growth. While the UK still faces an important infrastructure deficit, we are very pleased that the Government is not further slashing capital spending, meaning that vital regional transport projects like Birmingham New Street Station will be able to go ahead.”

ON ACCESS TO FINANCE:
“Adding £200m to the Enterprise Finance Guarantee for the rest of this year will help a number of companies get the vital credit they need to grow. We will continue to work with the Government on a scheme to support business access to finance as we come out of this recession.”

ON THE COMPREHENSIVE SPENDING REVIEW:
“The decisions taken in October’s spending review will have long-lasting effects on UK plc. Business will continue to press for higher expenditure on export promotion and infrastructure.”

The British Chambers of Commerce (BCC) is the National Voice of Local Business.
The BCC sits at the heart of a powerful nationwide network of Accredited Chambers of Commerce serving business across the UK, which employ over five million people