Intelligence Briefing - Environmental Taxes, Drafting the Equality Duty and Economic Growth

Published: 21/01/2011

IN THIS ISSUE - Terry Scuoler addresses key Conservative Party policy-makers - Talking environmental taxes with the Treasury - EEF meets with government officials responsible for drafting the Equality Duty - Weekly focus - In the news - Week in Review - The week ahead

Terry Scuoler addresses key Conservative Party policy-makers

EEF’s Chief Executive, Terry Scuoler, was one of the keynote speakers at a Conservative Party business summit discussing the future of manufacturing, this week. Speaking on a panel which included the Business Minister, Mark Prisk MP, and Gavin Williamson MP (one of the few recently elected MPs with personal experience of the manufacturing sector), Terry raised some of the key current issues for our members, including access to finance and support for exports. He also emphasised the importance of addressing the skills gap that exists in manufacturing at technician level.

On the same day, EEF’s Chairman, Martin Temple, also spoke alongside Mark Prisk MP at the launch of the Sheffield Global Manufacturing Festival, which begins in March.

Talking environmental taxes with the Treasury

EEF was represented this week at a Treasury workshop on environmental taxation, attended by the Chief Secretary to the Treasury, Danny Alexander MP, and the Exchequer Secretary, Justine Greening MP. In their election manifesto the Conservative Party pledged to increase the proportion of tax revenues accounted for by environmental taxes, but in doing so they also committed to ensure that any additional revenue generated from new green taxes would be used to reduce the burden of taxation elsewhere. This workshop was designed to see how environmental taxation can be used to change behaviour, but EEF has argued for the case for examining a carbon tax to replace layers and layers of poorly connected and over-designed and costly climate change policies. You can read more about this issue and the discussions with the Treasury in this blog.

EEF meets with government officials responsible for drafting the Equality Duty

We met with the government officials responsible for drafting the Equality Duty – the part of the Equalities Bill that sets out local authorities’ responsibilities for eliminating discrimination, advance equality of opportunity and foster good relations between different groups across all their functions. Last year, EEF successfully lobbied against government proposals to require Local Authorities to use their procurement activities to meet their Equality Duty. As part of its drive to give Local Authorities more power, however, the government has left the door open for Local Authorities to choose to require suppliers to meet equality standards. Given that most public procurers buy for lowest cost regardless of long-term value for money or other policy objectives, EEF argued that requiring suppliers to meet equality criteria would result in Local Authorities meeting their Equality Duty through a tick-box exercise that bundled businesses with extra burdens, without achieving the government’s aims.

For further information please contact Jeegar Kakkad, senior Economist

Weekly focus

Earlier this month, we published Economic Prospects – our views on what 2011 is likely to hold for the UK economy and manufacturing. There is much uncertainty as we enter 2011: sovereign debt in the Eurozone could yet cause significant repercussions; global trade imbalances which were causing currency tensions have not dissipated; and the threat of inflation is looming. Yet the UK’s economic recovery should gain momentum in the coming year and manufacturing will be a crucial part of this.

After strong growth in 2010, 2011 is forecast to be another strong year for manufacturing, with the sector once again outpacing the rest of the economy. We are forecasting growth of 2.1% for the whole economy (compared with 1.7% in 2010) and 3.5% in manufacturing (3.8% in 2010). As government spending cuts kick in, growth in 2011 will be more reliant on net trade and business investment.

Exports should be boosted by increasing demand from fast-growing emerging economies. This has already been driving export growth in the UK. Our recent Business Trends Survey also showed that manufacturers expect export demand to continue to grow. Given that manufacturing exports account for approximately half of all UK exports, the sector’s performance will be a fundamental driver of improvements in the balance of trade. However, currency tensions and increased commodity prices will make for a challenging and volatile global marketplace in 2011.

Business investment should also grow, as companies’ profitability and balance sheets have improved over 2010. Investment may also be aided by fewer constrictions on access to finance but challenges remain. Our recent survey data showed that while there was a fall in the proportion of companies seeing an increase in the cost of finance there was little evidence of the cost of finance falling. Additionally, recent analysis from the Bank of England suggests that the supply of finance has dropped by more than the fall in demand from business would justify.


In the news

Our latest pay settlement data was reported in the Daily Telegraph and City AM whilst our views on the definition of 'British' in manufacturing were reported in a feature article in the Daily Express. Our most recent Health & Safety survey was covered in The Manufacturer and People Management.


Week in review


CPI annual inflation moved up again, by 0.4 percentage points, to 3.7% in December. The most significant upward contributions to the change in the CPI between November and December were from: transport, which saw its largest monthly price increase (3.6%) on record; housing and household services; and food and non-alcoholic beverages. There was some downwards pressure from the price of clothing and footwear.

In the year to December, RPI inflation was 4.8%, up from 4.7% in November.

Labour Market Statistics

The three-month ILO unemployment rate remains at 7.9%, though the number of unemployed people rose by 49,000 over the quarter to 2.5 million. Conversely, the claimant count measure of unemployment – which records the number of people claiming Job Seekers’ Allowance – fell by 4,100 to 1.46 million. The claimant count rate remains at 4.5%. There are 144,000 fewer claimants than at this point last year.

EEF Pay Settlements

The three-month average pay settlement was 2.2% in December, up a little from a revised figure of 2.1% in November, though this figure is based on only a small number of settlements. 20.3% of pay settlements were between 0.0% and 2.0% in the three months to November and the proportion of pay deals between 2.0% and 3.0% was 38.1%. The monthly average settlement was 2.2% in December compared with a revised figure of 1.5% in November.

Retail Sales

Year on year, there was no change in the volume of retail sales in December. However, between November and December total sales volume decreased by 0.8%. Both food and non-food sales fell. Non-store retailing (which includes internet sales) rose by 5.4% its largest rise since March 2009.

Trends in lending

The stock of lending to businesses contracted by around £5 billion in the three months to November. The annual rate of growth for total lending to consumers picked up in October and November to 0.6%, the highest rate seen since September 2009, though it remains low.


The week ahead

Tue 25th: GDP (2010q4, preliminary)

Wed 26th: Labour Market Statistics; Index of Services; Public Sector Finances

Fri 28th: Retail Sales; Trends in lending

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