An article in this morning’s FT says that the next time the OBR reports to the Chancellor it is likely to say the government will miss its supplementary fiscal target (that the burden of debt should be falling in the year 2015/16); not great news for the Chancellor, who will be speaking at the Conservative Party conference later today.
But it is not just getting the deficit down that the Chancellor has to worry about. One of the main reasons the fiscal situation has disappointed is the sluggish recovery that the UK has seen. Of course, much of the weakness in growth is a result of the ongoing crisis in the Eurozone, but there is action that the government can take at home to support businesses and drive the recovery we need to see.
So what will business be looking to see from the Chancellor today?
Well, back in September, we launched our Industrial Strategy, where we called on the government to adopt an explicit growth strategy. We argued that the government must set out a clear vision for the kind of economy it wishes to see, and set out a clear plan to get there: one that sees all departments pulling in the same direction to achieve growth.
One month on and our survey of manufacturers shows the same thing: nearly 80% of companies want to see new measures to strengthen growth in the UK economy. In contrast, just over a quarter still see reducing the UK’s structural deficit as a top priority.
Fiscal credibility is vital, but we are in danger of the fiscal mandate – which was once a life raft for the economy – turning into a lead weight. We will only make sustained progress in reducing the deficit if the government has the strategy in place to deliver stronger and better balanced growth.
We have seen promising announcements to support growth: on infrastructure, on access to finance, and on regulation. But, government has yet to demonstrate to business that it has the same focus on growth across departments that it has on reducing the deficit.
The Chancellor’s speech today is an opportunity to convince business that growth is the number one priority across government and that there is a plan to deliver it.