BCC reaction to Budget speech

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

“The Chancellor appears to have understood that it will be business driving the economy out of recession, and there are some good measures that reflect this.

“A major concern has been raised over the income tax hike for the highest earners. The strength of the UK has been as a low tax economy giving us a competitive advantage and able to attract the most highly skilled workers.

“The top tax rate in France and Germany is 40% and 45% respectively, giving us the highest top rate of our major European competitors.

“If the government was serious about the UK remaining a global player they would not be throwing away such an important advantage for a relatively small return.”

Commenting on the main macro-economic points in today's Budget speech, David Kern, Chief Economist at the BCC, said:

"The Chancellor's Budget rightly acknowledges that the official GDP forecasts in the November PBR were far too optimistic. The recession is clearly much deeper than previously envisaged. The new GDP growth forecast, of –3.5% in 2009, is realistic.

“But, his expectation of 1.25% economic growth in 2010 is too optimistic, even if growth resumes towards the end of the year. More significantly, his assumptions of very rapid growth for a number of years from 2011 onwards are unrealistic.

"The outlook for unemployment is bleak, and we still expect a peak of some 3.2 million next year. It is doubtful if the measures announced today, however welcome, will alleviate significantly the jobless situation.

“If the Chancellor's growth forecasts prove indeed to be too optimistic, there will be adverse consequences for the credibility of his forecasts for the public finances.

“The official forecast that Government borrowing will be £175 billion this year, some 12.4% of GDP is realistic. However, the official forecast that the Budget deficit is set to halve in the next four years is based on over-optimistic growth assumptions.

"The Chancellor will have to do more to persuade the markets that the health of our public finances will be restored."

Ends

Media Contact:

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

Notes to Editors:

David Frost, Director General, comments on specific measures in the Budget:

Higher rate tax relief on pension contributions
“At a time when people’s pensions are taking a battering, this is not the time to further deter people from saving. Nothing was said about reforming public sector pensions, so all the Chancellor has done is reinforce the nation’s pensions apartheid.”

Credit insurance
“Having pressed strongly for support we welcome this announcement. The scale of the problem is growing and the withdrawal of credit is seriously undermining a growing number of businesses.

“This support will complement the support measures from the banking sector. Cash and credit are the lifeblood of business and we expect the private sector insurers to engage fully.”

Car scrappage scheme
“The automotive industry will be central to driving our economy out of recession and employs large numbers of highly skilled individuals producing efficient vehicles for the global market. It would be an absolute tragedy to lose these skills during this downturn. This targeted scheme will help British businesses.”

Business taxation
“The extension to loss carry-back will help with smaller business cash-flow. But, the Chancellor may have considered increasing the £50,000 carry-back limit to really make a difference. Nevertheless, the doubling of the capital allowance will have a positive impact, as will the expansion of the HMRC business support service.”

Strategic investment fund
“The future of the UK economy must be built on more solid foundations. New manufacturing technologies will be at the heart of this.

“This fund will help support new technologies but we have to ensure the money is targeted and we do not slip back into a period where we try to pick winners.”

UKTI
“The extra £10m for UKTI is to be welcomed. When global trade starts to expand business needs to be in a position to take advantage of this. Much greater focus will need to be paid to exports and this boost reverses cuts in the trade promotion budget seen over recent years.”

Fuel duty
“The Government has showed scant disregard for the beleaguered logistics and haulage industry. If the Chancellor wants to get the economy moving again it needs to help those industries that move our goods and services allowing people to buy and sell. Adding 2p onto fuel duty and further increases in years to come will only add to business costs.”

£1.7 billion funding for JobCentre Plus
“The extra money for JobCentre Plus is pleasing but it is not just money this service needs. Just 14 per cent of small businesses make use of JobCentre Plus but it is these small businesses, the engine room of the economy, who will be creating the extra jobs to help reduce unemployment.”

“The Chancellor’s excuse for not launching a short time working scheme is that for those who have had their hours and wages cut is that these people will be helped by the tax credit system. He has totally missed the point - a short time working scheme is needed for highly skilled professionals to enable the economy to retain these skills. The situation must be closely monitored.”

Employment & Skills
“While we support extra help for the unemployed and the guarantees for under 25s, any skills and training offered must be in economically relevant areas delivering real, high quality skills rather than merely seeking to accredit skills that people already have.

“We are disappointed that extra help for employers to develop the skills of their workforce during the downturn has not been forthcoming. Considering that Train to Gain has run out of money already, a real chance has been missed to help both employers and employees.”

Statutory redundancy
“An increase from £350 to £380 a week is reasonable. We hope this means that the government has resisted the temptation to hike the amount up to over £500 as this would be unaffordable and impractical during difficult economic times.”

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.