Despite some good measures, PBR disappoints

The British Chambers of Commerce (BCC) is responding today to the Chancellor’s Pre-Budget Report.

Commenting, David Frost, Director-General of the BCC said:

“If I were marking the Chancellor’s report card, I’d say ‘could do better’. There are a few good announcements in there like deferment of the Small Business Rate of corporation tax, allowing businesses to spread out the payment of their tax bill, and the new business finance scheme.

“The proposal to increase National Insurance Contributions is wrong. At the very time when the economy should be coming out of the recession, businesses will face an extra tax on employing people.

“This is not the way to reduce unemployment.

“Businesses will wonder why he didn’t just restore empty property rate relief in full, instead of only raising the threshold for a year. Restoring relief in full would have provided the vital stimulus to the hard-hit construction industry.

“Fuel duty increases should have been scrapped. What the Chancellor has announced today means that we could see two increases in fuel duty in a year.

“In the end this was billed as a fiscal stimulus to inject confidence into the economy. Time will tell if this has been achieved, but I can’t help feeling that the Government has missed an opportunity.”

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

"The Chancellor's PBR goes a long way towards acknowledging that we are facing a serious recession. But, we believe his forecasts are still too optimistic. Growth next year is likely to be worse than predicted and it is doubtful that positive quarterly GDP growth would start as early as mid-2009.

"If the Chancellor's growth forecasts prove to be too optimistic, there is a real risk that even the huge deficit figures announced today are still not sufficiently high.

“Mr Darling has outlined detailed plans for restoring the public finances to a sustainable state, but it is not yet clear he has done enough to reassure the markets.

"Given the dire state of the economy, the £20bn stimulus is welcome. Many individual measures in the PBR are helpful but business will be disappointed that a VAT cut is the main feature of the package. The direct benefits of a VAT cut are very uncertain. There could be significant leakages into savings and imports.

"Any boost to personal consumption resulting from lower VAT will be helpful. However, a VAT cut only provides a remote boost to business cashflow and profits. It does not provide sufficient encouragement for business to limit unemployment increases and to continue investing.

"In this recession, rising unemployment and plunging investment are serious threats. The decision to defer the increase in small companies corporation tax is useful, but it is a pity the increase was not cancelled altogether. It is also highly regrettable that the Chancellor has not lowered the NIC rate, and we are concerned over the decision that from April 2011 all NIC rates are to be increased for both employers and employees."

Ends

Media Contacts:

Fiona Cunningham
Tel: 020 7654 5812
Email: f.cunningham@britishchambers.org.uk

OR

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

Notes to Editors:

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.