EEF, the manufacturers’ organisation has urged the Chancellor to send a powerful signal to business in the forthcoming Budget that government has a clear strategy to address the barriers to growth and a Parliament long programme to deliver on it.
It should do this by setting out a ‘Growth Mandate’ to match its Fiscal Mandate. This will be critical to giving the business the confidence to grow, invest and create jobs in the UK.
On its own, however, this will not be enough to boost investment and growth in the short term. Government must show it is serious about promoting growth by matching this transparency with specific measures in four key areas: tax, regulation, access to finance and skills.
Commenting, EEF Chief Executive, Terry Scuoler, said:
“The fiscal mandate has reassured business about the stability of the public finances. Government must now send the same signal that it is serious about enhancing the competitiveness of our business environment by matching this with a robust Growth Mandate.
“This should demonstrate that all parts of government are working together to deliver the kind of growth our economy needs and, that it will focus on this task relentlessly over this Parliament."
In practice the mandate would set out priority areas for growth that government would address and, against which it will be measured. Like the Fiscal Mandate, the Growth Mandate should span the lifetime of a parliament with each subsequent Budget and policy announcement showing further incremental progress. This multi-year view must be taken where the barriers to growth are gradually dismantled.
Each Budget should therefore report, relative to the previous one on the following measures:
- The change in total tax costs faced by businesses;
- Estimates of the net change in bank and non-bank external finance to non-financial companies;
- The change in total climate and environment policy costs faced by businesses;
- All new and withdrawn regulations, and the change in the total cost of all regulation;
- The change in the proportion of companies facing skills shortage and hard-to-fill vacancies.
- The change in apprenticeship starts at each level.
In addition, EEF believes the Budget statement should also highlight how these actions are feeding into changes in output measures, such as comparisons on innovation activity and export market diversity.
EEF is also urging the Chancellor to take the first step in supporting private sector efforts to invest innovate and export by delivering an internationally competitive business environment. A failure to address this risks losing crucial future investment by UK-based companies overseas, as well as inward investment. In response EEF has made the following recommendations in four key areas:
- Reform the R&D Tax Credit to take into account development costs
- Modernise the Capital Allowances regime so that it recognises the true cost of re-investment by manufacturers
- Minimise the cost burden of environmental taxes. In particular, ensure a Carbon Tax is conditional on reductions in other energy taxes.
- Extend the remit of the Office of Tax Simplification to make structural changes to the tax system which will deliver major simplification for business
2. Access to Finance
- Introduce independent monitoring of banks adherence to lending principles
- Commit to an action plan for the recommendation of the Independent Banking Commission on measures to strengthen the banking system and increasing competition
- Examine future measures to increase the development of alternative sources of finance, especially non bank debt and venture capital
- Review future funding and demand for 14-19 diplomas with the aim of increasing support and improving delivery
- Introduce a pilot initiative through the Growth & Innovation Fund to support SME collaboration on industry placements
- Review the cumulative impact of thresholds for regulation and commit to further action on reform as appropriate
- Inclusion of EU legislation in either a system of ‘one in one out’ or regulatory budgets
- As scope for simplification of individual regulations has largely been exhausted, commitment to structural reform of entire regulatory domains is needed
- Publication of all Regulatory Policy Committee opinions prior to parliamentary stages of legislation
On measures to boost private sector investment, Terry Scuoler added:
“Whilst our economy might have entered this year in reasonable health, sustaining this and generating the right type of growth will be challenging. Rebalancing our economy requires growth that is driven by innovation, investment and trade.
“Manufacturing can deliver this growth but firms can choose from a wide a range of locations and will only invest in the UK if we develop a business environment that can compete with the best in the world. The Budget and Growth Review must be the start of a Parliament-long project to put this in place.”