In recent months, the government has been more vocal about the need for growth and importance of speeding up delivery. The Autumn Statement now needs to match these good intentions by providing some clarity on how this will happen.
Context for 2012 Autumn statement
The UK economy returned to growth in the third quarter, but business confidence remains more fragile than at the time of Budget 2012. Investment intentions across manufacturing have turned a corner but companies believe that their current levels of investment are insufficient to keep up with competitors.
Some of the weakness across our economy is down to the global outlook, which is outside the government's control but it should take action that would support firms looking to invest, export and grow. Government must build on its industrial strategy with a clear vision of the UK's economic priorities. This approach would send out a clear signal to the private sector about what is most important for growth and provide a framework for transparent decision-making that would give confidence that all parts of government are pulling in the same direction.
Maintaining fiscal credibility must remain a priority. Government must ensure that the UK is seen as making sustained progress towards better balanced growth coupled with a medium-term commitment to eliminate the deficit. Government could enhance its credibility not through further austerity but through providing greater visibility on future spending totals and signalling a switch from current to capital spending.
Reprioritisation of current spending must be tilted towards growth enhancing measures that support private sector investment and trade. New policies must align with a clear economic vision that will guide future decisions on new policy priorities and the implementation of existing ones.
Recommendations for action
- Access to finance: Government must clearly define the problem that further interventions are seeking to tackle. There are structural problems in the banking sector, particularly for SMEs and the focus of policy should be on increasing competition in that market. This includes an immediate review looking at progress on increasing competition and improving switching for consumers and businesses with a view to taking further action if necessary. It should also launch a review on the feasibility of introducing a bank or network of regional banks capitalised, but not guaranteed by the public sector.
- Tax and investment: Government could send to would-be investors through a time-limited 100% first-year capital allowance for two years. While there are concerns about the short-term cash flow cost of such a move; we are proposing that government examines a range of potential alternatives and their cost and impact on business investment decisions.
- Skills: Government should go further in seeking to create a demand-led skills system by enabling employers to come together to create a single apprenticeship standard for their industry, re-directing funding for apprenticeships from providers to employers by reductions in National Insurance Contributions (NICs) and tasking Local Enterprise Partnerships explicitly with bringing together local employers and providers together to collaborate effectively.
- Employment law reform: The Growth Implementation Committee must ensure that faster progress is being made. The key priorities for manufacturing are reform of TUPE, Collective Redundancies, Employment Tribunals and the introduction of Protected Conversations.
- Infrastructure: The £5.3bn ‘underspend' by government departments in 2011-12 should be re-allocated to investment in infrastructure.