Time to grow our way out of austerity

According to the CBI

The UK needs a Budget that will enable the country to grow its way out of austerity, the CBI has said in its submission to the Chancellor of the Exchequer. Faced with generation-defining challenges, this Budget should send signals that the UK is open for business and committed to supporting entrepreneurs and ambitious firms to thrive in all parts of the UK.

The CBI says the Government’s Budget is an opportunity to back the basics of a strong market economy and show how good government in partnership with responsible business can improve lives, regardless of the outcome of the Brexit talks.

In its pre-Budget letter to the Chancellor, the CBI sets out a series of measures aimed at bringing the UK’s new Industrial Strategy to life through concrete action, as a means of reinforcing the UK economy against future challenges.

Carolyn Fairbairn, the CBI’s Director-General, urges the Government to get on with doing what it has promised – greenlighting large and small infrastructure projects, implementing the ground-breaking T-Levels programme and providing practical support for innovators.

Against the backdrop of subdued investment, business leaders need a stable, pro-enterprise environment. Top priorities are: improving education, fuelling inward investment in energy and infrastructure, spurring innovation and promoting competitiveness through the tax system. New measures should build on what has been started.

Carolyn Fairbairn, CBI Director-General, said:“Brexit planning must not be allowed to crowd out vital action at home. With this Budget, the Government needs to set its eyes on the horizon, not the next few yards.

“The only sure way to raise living standards and provide sustainable public services is to solve the UK’s productivity problem. This means tackling the weak foundations of our economy with consistency and determination.”

Business priorities in the CBI’s Budget submission include:

  • Communicate a clear plan on the Government’s Industrial Strategy with a timetable for the consultations promised in the Industrial Strategy green paper
  • Protect per pupil funding in real terms for this parliament and replenish schools’ capital budgets to support investment in long-term growth
  • Commit to fast delivery of planned infrastructure projects within the current road and rail investment pipelines, with clear timeframes and implementation plans including investment in ultra-fast digital networks
  • Ensure business rates incentivise productive investment – especially from our manufacturers - by exempting new plant and machinery investments from rates bills and bringing forward the RPI to CPI switch
  • Set out a pathway to reach an investment target of 2.4 per cent of GDP on R&D by 2027 and increase Innovate UK’s funding for collaborative R&D.

The CBI is also asking the Chancellor to provide government departments with resources to make a success of Brexit, and set out a vision for tax policy that enhances the attractiveness of the UK as a place to do business.

Introducing the CBI’s Budget submission Carolyn said: “The UK is facing the most complex challenge of the post-war period in leaving the EU, particularly at a time when the UK economy has gone from the fastest growing in the G7 to the slowest. The UK needs a Budget that will enable the UK to grow its way out of austerity.

“Faltering consumer and business confidence risks lowering living standards, so it’s important the Government sends firms the right signals they need to continue investing and growing.

“Ministers need to build on the basics to get our economy in shape for the challenges ahead by committing to a pro-enterprise environment and maintaining a relentless focus on the drivers of productivity.

“It’s critical the Budget ensures growth reaches all parts of the UK. A bold Industrial Strategy, with a clear delivery timetable and measurable progress is needed to eradicate differences in living standards around the UK.

“Amid heightened economic uncertainty, the focus must be on incentives to invest today, not postpone until tomorrow. To unlock investment in the UK’s factories and high streets, business rates should be aligned quicker with CPI not RPI and equipment investment excluded.

“Ultimately, building a more prosperous and fairer society requires a relentless commitment to pursuing productivity improvements.”

On Industrial Strategy, Carolyn said: “We are setting out a series of measures aimed at bringing the UK’s new Industrial Strategy to life through concrete action, as a means of reinforcing the UK economy against future challenges.

“Fixing the foundations of the economy at home will help protect jobs, increase wages and living standards against the backdrop of uncertain UK/EU talks.”

Industrial Strategy recommendations include:

  • Provide business with a clear timetable for the consultations promised in the Industrial Strategy green paper
  • Appoint an independent commissioner to ensure areas without devolution deals do not miss out on available funding
  • Establish transparent criteria for choosing how money from the Industrial Strategy Challenge Fund will be spent, ensuring it applies to a broad range of sectors and be open to businesses of all sizes.

On education and skills, Carolyn Fairbairn said: “Preparing the UK’s workforce for technological change is of the utmost importance to bolster prosperity and improve people’s life chances. It’s the best economic growth strategy we have. By addressing underfunding in education, incentivising high-quality teaching and delivering the long-overdue careers strategy, the Government can cement a way forward for tomorrow’s workers.

“Ensuring effective delivery of the apprenticeship levy means finessing its design and committing to pilots for pooling local funds that help SMEs train at scale. Getting processes and delivery right will help to soothe firms’ concerns over quality and appropriateness of training.”

Education recommendations include:

  • Protect per pupil funding in real terms until 2021/22, including replenishing capital funding budgets
  • Tackle poor teacher recruitment and retention by reviewing incentives, particularly in areas facing the greatest challenges (Opportunity Areas).

Apprenticeship levy recommendations include:

  • Boost productivity growth by redesigning the apprenticeship levy to allow companies to pool their levy funds to support local provision, and raise the transfer cap so firms can share more than 10 per cent of their levy with their supply chain
  • Address shortfalls in the levy’s design by investing in better commercial skills within DfE and a broader role for the Institute for Apprenticeships and Technical Education to monitor and challenge policy and system performance
  • Over the parliament, begin the evolution of the apprenticeship levy into a more flexible skills levy that better meets learner and company needs.

On infrastructure, Carolyn said: “Infrastructure improvements will help to tackle regional inequalities, so action to address delays in road, rail and aviation requires urgent attention.

“A strong pipeline of projects exists – but we need to move faster to get things moving on a clear and deliverable timescale.

“Private finance can play a vital role in helping to unlock much-needed progress in the UK’s infrastructure upgrades.”

Infrastructure recommendations include:

  • Maintain timely progress in delivering existing major projects across the UK
  • Keep pace on delivering the current road and rail pipeline, reducing times between projects being announced and coming to market
  • Immediately distribute the £490 million pledge made at Spring Budget to improve local infrastructure networks.

On energy, Carolyn said: “Last week’s Clean Growth Strategy provided a welcome direction of travel, and now the energy industry needs the underpinning policy stability and certainty to support investment and innovation.

“An affordable energy transition is important to the competitiveness of our industry and the prosperity of our communities. Policies which grab headlines are often ones which are detrimental to the long-term goal of attracting investment into a renewed UK energy infrastructure. To make a real difference, politicians need to work with companies in the interests of consumers, putting a real emphasis on engagement and energy efficiency.”

Energy recommendations include:

  • Support low-carbon investment by setting a clear and regular pipeline for Contracts for Difference auctions
  • Support transition to low-carbon energy while maintaining competitiveness for energy-intensive industries by freezing Carbon Price support to 2022 with the provision of sufficient support to electro-intensive industries
  • Boost bill transparency for consumers by documenting all policies, levies and future policy cost projections
  • Take forward proposal to establish an Industrial Energy Efficiency Scheme, in consultation with business as soon as practically possible.

On tax and regulation, Carolyn said: “The UK’s tax system should help rather than hinder firms’ competitiveness and underline the country’s attractiveness as a fantastic place to do business.

“To create stability, the Chancellor should set a high bar for tax changes, focussing on targeted measures that address the current economic challenges: supporting investment and productivity growth.

“Short-term actions, such as accelerating business rate reforms, should be coupled with a longer-term vision for tax policy providing the certainty companies crave.

“With the clock ticking, it’s absolutely crucial planning starts now to identify gaps across Whitehall where extra capacity will be needed regardless of the outcome in the UK/EU negotiations.”

CBI recommendations on tax and regulation include:

  • Review current cross-Government capabilities in light of Brexit and publish list of departments and bodies requiring greater resources by Christmas
  • Ensure HMRC is properly resourced to ensure right amount of tax paid at the right time so firms can concentrate on their business
  • Limit business rates burden by bringing forward the switch from RPI to CPI
  • Exempt new plant and machinery investments from business rate calculations
  • Freeze remaining long-haul band of Air Passenger Duty and seek alignment of a single flat rate between airports in England and devolved nations
  • Outline long-term intentions for bank levy, Insurance Premium Tax and corporation tax surcharge, including commitment the surcharge will be phased out over time
  • Commit to further consultation to assess merits of staggering tax incentives to promote long-term investment. 

On innovation, Carolyn said: “Innovation remains the bedrock of productivity growth. Unlocking public and private investment in R&D to catch up with our international peers will be vital if the UK wants to be at the forefront of the technological revolution.”

Innovation recommendations include:

  • Set an interim target for public investment in R&D by the end of this parliament as part of commitment to hit R&D spending equal to 2.4 per cent of GDP by 2027
  • Increase grant funding through Innovate UK to help meet the above target. This should focus on ‘crowding-in’ business investment via collaborative R&D and continued support for catapult centres
  • Fund pilots to improve adoption of tried and tested technologies and management practices to improve productivity.

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