Ahead of tomorrow's Budget, EEF is calling for the government to adopt a clearer, stronger strategy for growth. The government should establish a commitment to growing the economy with the same clout as the commitment to balancing the books embodied in the Fiscal Mandate.
We have been blogging about what such a Strategy for Growth would look like, centred around four key ambitions:
The next question, then, is what sort of policies would get us to this point?
How do we get more companies bringing new products and services to market?
One way is to ensure that the introduction of an above-the-line R&D tax credit benefits as many firms as possible. The reform to the tax credit has been announced, but the consultation process needs to ensure that companies who contract with the government on a ‘cost-plus' basis also benefit from the move.
How do we get more globally-focused companies expanding in the UK?
One way would be to introduce 100% capital allowances for a two-year period. This policy would boost cashflow, and therefore investment, especially for firms who are constrained in their access to external finance, or unwilling to use external finance.
Another measure would be to ensure that the new National Loan Guarantee Scheme which is designed to reduce the cost of credit is widely available and accessible to business previous schemes have been held back by poor awareness of the products by bank employees: the government must take an active role, beyond London, in making sure that NLGS-backed loans are understood and promoted in the regions.
How do get a more productive, more flexible workforce?
One way would be to address long-standing issues surrounding careers advice by making STEM careers advice part of CPD for science teachers
How do we reduce the cost of doing business in the UK?
One way would be to remove the carbon price floor by 2015, and limit its cost until then. In particular, the government should not use this budget to increase the Carbon Price Support to compensate for weakness in the European carbon markets. Such a move would translate into a 6-7% unilateral increase in UK industrial energy prices.
Another way would be a 1% cut in employers' National Insurance Contributions for new employees aged 18-24. This would incrementally reduce the tax burden for employers looking to hire new staff and would add to the tax system's support for recruiting young people, who are particularly suffering from unemployment. Such a measure should be extended to all employees when fiscal conditions allow.
These are ideas that would fit with our Strategy for Growth, but this list is not exhaustive. The importance of the strategy is that it frames the thinking about which policies are, and are not, sensible to adopt. It also provides a set of measures against which can hold the government to account.