The Chancellor, George Osborne, will get up at the Houses of Parliament on Tuesday 29 at 12.30pm, facing calls for dramatic interventions and tax changes to kickstart the flagging UK economy.
Alongside the Chancellor’s statement, the Office for Budget Responsibility will publish its latest Economic and Fiscal Outlook. The Bank of England cut its 2011 growth forecast to 1% earlier this month when Sir Mervyn King warned that the outlook for world growth has worsened. This means that the OBR forecasts are unlikely to be positive, adding to the pressure on Osborne to pull a rabbit out of a hat to try to stimulate growth.
During the last few weeks, groups ranging from business lobbyists and special interest groups have all been offering the Chancellor their advice on what to do. As the stakes rise, there are few portents about the substantive measures he will put on the parliamentary table on Tuesday.
Unlike the comprehensive pre-Budget reports favoured by Labour Chancellors Gordon Brown and Alistair Darling, Osborne’s Autumn Statement last year was a relatively content-free political speech, with few concrete measures released on the day.
The most significant developments emerged a week later, with a raft of draft clauses for the Finance Bill (now Act) 2011. The Treasury has indicated that the same pattern is likely to be repeated this year, but so intense is the expectation around the speech that he may choose to spring a few surprises on us.
Already announced:
Unlike previous Budgets and pre-Budget reports, the Coalition Government has not been hoarding all of its announcements for the big day. In the last few weeks, it has unveiled a number of initiatives:
- On Tuesday, the Department of Work and Pensions published a Sickness absence review that recommended tax breaks for employers helping long-term sick workers return to work, reduced statutory sick pay reporting requirements and an end to the Percentage Threshold Scheme.
- During Global Entrepreneurship Week, the Government unveiled a number of schemes to benefit business owners and employees such as a revamped Business Link website, a National Consortium of University Entrepreneurs scheme and a Get Mentoring network.
- As part of the government’s drive to combat rising unemployment, Vince Cable also announced a £2,275 wage incentive for employer’s willing to hire jobless 16 to 24 year-olds.
Mark Prisk told BusinessZone in an exclusive Q&A session that the chancellor was “serious” about improving access to credit for small business. He later revealed that the Government plans to spend more than £78 million on small business support programmes, including finance schemes such as the Enterprise Capital Funds and the Enterprise Finance Guarantee scheme.
The Government has also announced that a Regional Growth Fund would provide £500 million more to small firms. The Business Minister likewise promised “common sense changes” to health and safety regulations, but batted back the suggestion of a VAT holiday for start-ups in their first year. “A blanket scheme wouldn’t work for everyone,” he said.
What employers want
A number of business lobbyists and accountancy groups have also presented their statements of request to the Chancellor in recent weeks. The British Chambers of Commerce released a statement in agreement with the Bank of England’s inflation prediction, but urged the committee to reassess its reluctance to purchase private sector assets and take further measures to reinforce the credit easing programme.
Earlier this week, The Federation of Small Businesses called for help with credit easing to address the issue of small firms’ access to finance. The group requested a National Insurance Contributions holiday for small businesses that employed young people as well as a specific credit easing policy.
The Federation of Private Business called for a number of changes, which included:
- Enabling a greater business voice in how skills-related money is spent – employers are eager for either a voucher scheme for skills training or NI reductions for apprentices.
- Ensuring that the Regional Growth Fund delivers financing on a much quicker basis by relaxing requirements on due diligence for low value bids, while continuing to support and clarify the role of Local Enterprise Partnerships.
- Freezing business rates in April.
- Postponing all fuel duty increases scheduled for next year.
- Introducing further tax breaks for private lenders and equity investors, which would ease credit conditions for small firms.
- Doing more to boost confidence in alternative sources of finance for low turnover businesses and introduce tax incentives for alternate lenders.
John Cridland, director-general of the Confederation of British Industry, said: “The Government must stick to its plans to bring down the deficit to maintain confidence in the UK’s public finances and keep the cost of borrowing down, but now is the time to revitalise its growth strategy and create a “Plan A plus”.”
