CHANCELLOR RIGHT TO ADMIT FORECAST WRONG
Pre-Budget Report fails to address business concerns
Responding to the Chancellor’s December 2005 Pre-Budget Report, Bill Midgley, President of the British Chambers of Commerce (BCC), said:
“The BCC has consistently said the Chancellor's growth forecast was far too optimistic and it was right that he has admitted that growth is half of what he predicted in March. The Chancellor acknowledges that this year the economy has weakened sharply and is slowing dramatically more than forecast. We now need to see the Chancellor listen to business concerns to boost competitiveness and GDP back to long term growth levels.
“Although the figures published today are more realistic, they assume that UK growth will improve over the next year. Without such an improvement, UK growth could fall below 2% in 2006. We are surprised that for 2007 and 2008, he is predicting very high growth of 2.75% and 3%. This is again very surprising at a time when our Quarterly Economic Survey signals falling business confidence.
"The Pre-Budget Report has not addressed the serious concerns that public spending and borrowing remain too high - the Chancellor has raised his borrowing forecasts every year until 2010. Looking at 2006 and beyond, businesses are very concerned that excessive spending and borrowing may necessitate damaging tax increases. “
Bill Midgley continued: “We welcome the Government’s continued commitment to cut the burden of regulation on business and the savings announced today. However the cost of regulation on business is rocketing with our figures showing an additional cost of nearly £40bn since 1998 which is damaging our businesses ability to compete. We want a timetable for delivery with specific targets set across all departments to achieve a net reduction in regulatory costs.“
The BCC also welcomes various measures to boost skills, to implement the Barker Review recommendations and address energy concerns. The BCC also welcomes measures to encourage innovation and enterprise.
Mr Midgley added: “However we have concerns that the removal of the 0% starting rate of corporation tax will harm the growth of some of the smallest firms. The increase in the first-year capital allowances on small firms’ spending on plant and machinery is welcome, but we had hoped for more tax incentives to encourage enterprise amongst small businesses.”