REVIEW OF NATIONAL INSURANCE/PAY AS YOU EARN ALIGNMENT
The BCC strongly supports the Chancellor's decision to examine the case for reforming National Insurance. Unlike PAYE income tax, NI is widely regarded as being complex, illogical and unfair. The administration of NI causes particular difficulties for businesses, accounting for 40 per cent of the annual £2 billion compliance costs that the payroll system imposes on businesses. The time for simplification of NI is long overdue and we hope that today's announcement will lead to substantial and lasting reform. The British Chambers of Commerce has led the debate on simplifying the system and businesses across the country should be delighted.
We are disappointed that the Chancellor did not produce specific targets across Government Departments to reduce the burden of regulation on business. The Government had declared 2006 to be the year of delivery for deregulation but our figures this year show that the additional cost of regulation on business since 1998 has now reached £50bn. British businesses are fed up with paying for Government regulation. We want a timetable for delivery with specific targets set across all Departments to achieve a net reduction in regulatory costs. It must be part of a cultural change across Whitehall so that future regulations do not impose unnecessary burdens.
REFORM OF UK TRADE & INVESTMENT
The BCC supports an increased focus on rapidly emerging economies such as China and India. However, we are very concerned that the Government's focus is heavily weighted towards inward investment and provides little support for exporters. The Government's export support budget has suffered severe cuts in recent years, at a time when growth in UK exports fell from 9.1% in 1994-96 to 3.5% in 2003-05. UK exporters need more support, not less, in order to capitalise on the opportunities provided by the emerging economies in the Far East.
R&D TAX CREDIT
The BCC is encouraged that the Government has extended the R&D tax credit. We would have liked to see it extended to cover SME’s expenditure on intellectual property which is a major issue for technology-based manufacturers.
CARTER REVIEW OF HMRC ONLINE SERVICES
The BCC recognises the potential for online services to enhance businesses' communication with HMRC. However, employers remain very sceptical about HMRC's ability to deliver robust and efficient online filing systems. The target for businesses to file all returns online by 2012 is ambitious and it is imperative that all aspects of IT are properly tested. Businesses also require further incentives from the Government in order to meet the 2012 online filing deadline.
This Budget has not addressed the serious concerns that public spending and borrowing remain too high - the Chancellor has raised his borrowing forecasts again. Businesses remain very concerned that excessive spending and borrowing may necessitate damaging tax increases.
The Chancellor's GDP growth forecast for 2006, at 2-2.5%, is realistic and is in line with the 2.2% figure for 2006 quoted in the BCC's latest Quarterly Economic Forecast issued in February. But the Chancellor's growth forecasts for future years, at 2.75-3.25% for both 2007 and 2008 still appear to be unduly ambitious. Recent falls in employment and rises in unemployment highlight the fragility of the recent modest upturn in growth, and the serious dangers facing the UK business sector. Given the low level of business confidence, the forecast of a strong recovery in business investment is difficult to justify.
The Chancellor's optimism contrasts with the economy's recent mediocre performance and his forecasts for public finances are also too ambitious particularly beyond the next 1-2 years, even though today's figures signal a worse position for 2006/07 than in his Pre-Budget Report.
The Government's pledge to rationalise business support services from more than 3,000 to 100 by 2010 and make them more targeted is long overdue. We are delighted that the current proliferation of services is finally to be reviewed. Our own research shows that only 35% of businesses believe publicly provided business support services meet the needs of their business. The BCC has already been reviewing business support services, in particular Business Link, and is firmly convinced that only private-sector led solutions can provide business support that meets the needs of the private sector. We will certainly be contributing to the Government's de-proliferation exercise and working with national and local bodies to achieve this. We believe that the Government is right to introduce intensive coaching and other assistance for high growth SMEs. These businesses are essential for the competitiveness and growth of the UK economy and every support should be given to them to grow. Likewise the extension of the Enterprise Capital Fund pathfinders for companies with growth potential is a step towards improving access to finance for SMEs, a frequently cited barrier to enterprise.
DEVELOPING AN ENTERPRISE CULTURE
The Schools Enterprise Education Network is a valuable development which should help all schools embed enterprise education in the curriculum. The Network will offer opportunities for schools which have been slower to adopt enterprise education to learn from those who are already providing at least five days' enterprise education and understand its necessity. The enterprise summer schools pathfinders are likewise welcome. They must not, however, be a substitute for high quality, meaningful enterprise education in schools during term time, but an additional opportunity for young people. If the summer schools involve business people, forge long-term links between young people and local businesses and result in young people having a clearer idea of what enterprise is and how they themselves can be entrepreneurial, then the summer schools will be a wise investment.
LOCAL ENTERPRISE GROWTH INITIATIVE
The Local Enterprise Growth Initiative has the potential to stimulate enterprise in some of our most disadvantaged areas, provided that it fully engages with the private sector. Many of the successful Round 1 bids have Chamber of Commerce engagement, if not leadership. Following today's announcement inviting bids for the second round, local authorities submitting bids for LEGI should look to the private sector for leadership and expertise on economic development. They must take advantage of the longer-term funding available and utilise real business engagement to develop a robust business base that will survive and prosper after the public funding finishes, ensuring regeneration is sustainable.
THE REGIONAL ECONOMIC CHALLENGE AND CITIES
Measures to help cities' economies grow are to be welcomed. Cities are the driving force of the UK economy and it is in the interest of local communities and businesses that we have strong cities. We need to give cities greater autonomy if they are to maintain their leading role in economic development. However, before we do that, there has to be greater trust between business and local government. Nothing less than a reinvention of civic leadership is required, where the business community is effectively engaged in decision-making, not just scrutiny. Financial devolution cannot happen until and unless we achieve this. In any bid to assist cities' growth, other areas should not be overlooked. More effective decision-making, involving businesses, is needed across the board.
INCREASING HOUSE BUILDING AND PLANNING GAIN SUPPLEMENT PROPOSALS
The shortage of housing supply, including social housing, needs to be urgently addressed as it has a knock-on effect on businesses’ ability to recruit and retain skilled employees and restricts businesses’ choice of where to locate. The BCC is pleased to see the upward trend in house building during 2005. We now encourage the Government to implement the recommendations of the Barker Review of Housing Supply as quickly as possible, in conjunction with developing adequate infrastructure to support housing growth. As part of that, we look forward to contributing to the review housing-related infrastructure. The business community is well aware of the need to improve the UK’s infrastructure but does not believe, however, that the proposed Planning Gain Supplement is the way forward: it would constitute an extra tax on businesses and an added burden at a time when the Government is purportedly looking to reduce burdens on business.
In its assessment of public finances, the Budget includes the estimated figure of £20.3 billion raised by business rates in 2005-06 and a projected figure of £21.4 billion for 2006-07. These are very substantial sums by any calculation and as a result the needs and concerns of businesses should be duly acknowledged. Prior to 1990 local authorities imposed arbitrary and excessive increases in business rates. In a competitive global economy, UK companies would be severely damaged if there were a return to this situation. The BCC is therefore adamant that the business rate must be retained at the national level and have been working closely with the Lyons Inquiry on this issue. The national system ensures accountability and stability, with the safeguards that businesses need built in. Businesses are not opposed to paying fair business rates but we would be against any control over business rates being returned to local authorities.
EDUCATION & SKILLS
Investment in education and skills is paramount if the UK is to have the highly-skilled and flexible workforce we need to continue to be competitive in a fast-changing global economy. We support the Chancellor's announcement that he will increase investment in the education sector, establishing a world-class education system. In particular, we welcome the increased investment in schools and the focus on science skills, as well as the proposals to make the further education sector more employer-facing and more regionally and locally accountability. We look forward to further announcements in the FE white paper and the proposals of the final Leitch Report, due this spring.
ENERGY & ENVIRONMENT
We accept that the business community has a role to play in stabilising and reducing greenhouse gas emissions and we support many of the announcements made in the budget. It is of concern, however, that some attempts to control polluting behaviour are harming the competitiveness of UK firms. We are particularly concerned about the proposed increase to the climate change levy, which we believe is significantly adding to business costs without meeting the environmental objectives that it is intended to achieve. It is also uneven in its impact, disproportionately disadvantaging the manufacturing sector. We welcome the announcement of the review group on how to help businesses receive information and support to improve energy efficiency. Improving energy efficiency is clearly important both for individual firms and for the wider environment. We look forward to participating in this group to improve the support that business needs. We also welcome the announcement of a National Institute for Energy Technologies that will develop technologies to reduce carbon emissions and promote security of supply. Further support for the Low Carbon Buildings Programme is also welcome.