With the usual speculation heating up, last week the PM provided some context for next week's Budget. We were again reminded of the dangerous imbalances that had built up in our economy and that the coalition's three pronged approach to sorting them out remained the only real course of action.
PM: First, a clear plan to deal with the deficit; secondly reforming our banks so they serve the economy and third, restoring our competitiveness.
For much of the past three years the coalition has repeatedly emphasised its commitment to deficit reduction. EEF has supported government's efforts to maintain its fiscal credibility, but with the rules now at breaking point the Budget needs to be attacking the UK's growth challenges with a great deal more vigour.
EEF's submission to HM Treasury ahead of the Budget builds on the themes of banking reform and competitiveness set out in the Prime Minister's speech.
EEF CEO: “Having made it clear that it is sticking to its current economic course, the government must also demonstrate that it has the strategy to deliver the stronger economy that will pay down the deficit. This means accelerating action that will deliver public investment in key areas and unlock investment by the private sector.”
On banking – as we have set out previously – the focus must be on increasing competition in SME banking. Government should now conduct a short review of options to increase competition in SME business banking that must include: an incentive to encourage switching banks; lowering barriers to new entrants; and moves to full account number portability.On increasing competitiveness:1. Commit to long-term compensation for energy intensive industries from environmental taxes.2. Create the demand-led system of training and funding that has long been promised and commit to keeping decisions on skills funding national rather than devolved them to LEPs.3. Reallocate all departmental underspends and receipts from any future sales of public assets to infrastructure spending. Additional funding must be focused on projects that can provide a timely and significant boost to the economy such as local road maintenance and bringing forward planned upgrades to heavily-congested major roads. The government also needs to ensure that committed expenditure gets into projects as fast as possible.We do not, however, see the wholesale implementation of Lord Heseltine's ‘Single Pot' recommendations as the silver bullet on growth. What we must see in government's response to the review is clear safeguards in place to ensure that significant amounts of taxpayers' money are used effectively. In practice this will mean clear evidence that devolving control of funding delivers better value for money, LEPs demonstrating the capability to take on significant new responsibilities and control must being devolved gradually as LEPs prove their value in driving local growth.