Spending Review: Fix the fundamentals to boost exports and investment, says BCC
28 October 2015
Ahead of the Chancellor’s Spending Review and Autumn Statement announcement on Wednesday 25 November, the British Chambers of Commerce (BCC) is urging the government to fix the deep-rooted structural issues facing the UK economy.
While the UK economy continues to grow at a good pace, the slightly weaker numbers recorded in the BCC’s latest Quarterly Economic Survey, combined with major uncertainties over China and a continued weakness of the eurozone, are a stark reminder that the UK’s economy remains in need of care and encouragement. Business wants three structural issues to be at the heart of the Spending Review:
• Fixing a dysfunctional business finance system
• Delivering business infrastructure fit for the modern age, including promised investments in road and rail schemes, long term energy security at lowest cost and upgrading our digital infrastructure
• Closing huge and worrisome skills gaps, to help young people succeed in tomorrow’s workforce and enable businesses to compete on the global stage
Given that the last Spending Review was defined by the ‘salami-slicing’ of public expenditure, the BCC firmly believes that the focus of this one must be on reshaping the role of the state so that its overriding objective is as an enabler of growth and productivity. Only this will achieve the efficiencies and strengthening of our tax base that are necessary to secure our long term economic future in the face of future shocks.
The BCC’s Spending Review submission therefore outlines a business blueprint for the role of the state, and recommends that central government spending prioritises three areas:
• Delivering fundamentals outlined above, that are vital to supporting growth and productivity, including infrastructure, skills, and a stable tax system
• Intervening where market failure exists, such as improving regulatory oversight to support growth and accepting a role for the state in addressing structural issues such as access to finance
• Facilitating the development of markets that are vital to our economic future, including critical intervention in science and research, which underpin tomorrow’s business prospects
John Longworth, BCC Director General, said:
“For decades, successive governments have created and disbanded a raft of business support programmes, which have either tinkered around the edges or had no impact at all. The limited resources at the Chancellor’s disposal should therefore target the structural issues that are holding us back – in training, infrastructure and finance.
“Businesses up and down the country broadly support the devolution of powers to local areas in England. If done properly, it can drive greater efficiency, accountability, and better results. However devolution must be done for sound business reasons, and not just for political gain. All devolution proposals should have a test, measuring their impact on businesses, before they are taken into legislation. There should be no business taxation without representation.”
Specific measures in the BCC submission include:
• Additional funding to clear the backlog of local road maintenance. A functional road network would result in fewer business hours lost queuing in roadworks and congestion (£1.4bn pa in additional spending)
• Safeguard the upgrades to the UK’s railway network (safeguarding £7.6bn pa budget)
• Ensure that any “national infrastructure plan” investment does not contribute to the debt target, meaning that central government expenditure is not burdened
• Invest in ultrafast broadband, including taking the lead in the introduction of 5G technology (£375m pa in additional spending)
• Improve HMRC service to business by match-funding investment in tax avoidance with investment in support and advice (£160m pa in additional spending)
• Real terms protection of science and research budgets, and measures to protect IP, and translate this into practical application for the benefit of British business and the UK economy (safeguarding £4.9bn pa budget)
John Longworth added:
“Given that some areas of expenditure are ring-fenced, the challenge of delivering the remaining £20bn of fiscal consolidation must not be understated, and our ability to generate sufficient tax receipts has been hit hard by the recession.
“Businesses do support a leaner state overall. However it is unacceptable that programmes that do little to boost UK output are being protected at the expense of capital investment, the maintenance of key infrastructure assets, investment in skills and business access to finance. Fixing our productivity problem requires significant investment in people and infrastructure. Anything less and we will struggle to put our economy on a strong footing.”