Number 10 summit
Our Chief Economist, Steve Radley, was one of a small number of key stakeholders to be invited by the Prime Minister to a meeting at 10 Downing Street to brief him on the current economic situation and measures that can be introduced to address it. The meeting was also attended by the Chancellor of the Exchequer, Rt Hon Alistair Darling MP and the Minister of State for Competitiveness Baroness Vadera.
We briefed them on the early results of our fourth quarter business trends survey which have shown a sharp deterioration in conditions during the autumn, as well as the results of extra questions on availability of credit and late payment. We called for a significant fiscal stimulus in the pre-budget report, the specifics of which are covered in detail below, as well as a reform of the fiscal framework to bring public borrowing back to sustainable levels.
Pre-Budget report
Ahead of the pre-budget report we have called for a £30 billion fiscal stimulus in the pre-budget report to help business and consumers through the current downturn. The proposals involve cuts in the small company and headline rates of corporation tax, the starting rate of income tax, vat and public spending programmes. With regard to public spending temporary increases should involve government bringing forward investment in education, health care and the transport infrastructure projects that are vital building blocks for long-term sustainable growth.
In addition, this would include targeted business support programmes similar to that announced for the West Midlands. However, we have only given our backing for such a stimulus on the basis that it is temporary so as not undermine the long-term health of the public finances. Furthermore, any stimulus on such a scale must be backed by a medium term strategy to reform the fiscal framework.
Conservative spending plans
We gave no more than a lukewarm reaction to the announcement by the Conservatives that they will no longer stick to the current public spending plans from 2010. In comments reported in the Financial Times we said that whilst manufacturers are always keen to see efforts to cut waste in government spending and reduce the tax burden, their current priority is not spending totals two years ahead but surviving the most severe economic downturn for at least two decades.
We believe that right now they companies are looking for urgent action to prevent the economy lapsing into a severe recession, stave off large scale redundancies and avoid many well-run businesses going under.
Pensions
This week we attended a meeting of the DWP Better Regulation Stakeholder Group of which we are a key advisory member. At the request of Rosie Winterton, the DWP Minister of State for Pensions and the Ageing Society, who chairs this meeting, we briefed her on how the current economic situation is affecting manufacturers and argued that the Government should therefore delay the implementation of employment legislation, such as any increase in Statutory Redundancy Pay, that could increase employers' costs or administrative burdens.
Pay data
Our latest pay figures showed that the number of companies reporting that they had either deferred their settlement or, frozen pay, had risen sharply to nearly 1 in 4 of all settlements in the last three months. For the three months to end of October, nearly 12% of companies reported that they had deferred their pay settlement, the highest level since November 2001, and nearly 13% of them had frozen pay, the highest level since December 2003.
This has resulted in the average level of pay settlement falling sharply to 2.8% for the three months to the end of October from the revised figure of 3.1% for the 3 months to the end of September. After a prolonged period when settlements have remained just above 3%, this was the lowest figure reported since June 2006.
Media Coverage
We continue to be a key commentator on economic and employment related events in the written and broadcast press. Our response to the Conservative spending plans was quoted in the Financial Times and our pay data was widely reported including twice in the FT and Daily Telegraph. Interviews were given to the BBC main news on the falling oil price by Steve Radley and on the general situation affecting manufacturing for News 24 by Head of Economic Policy Lee Hopley.