Big cities and small firms need Budget support to boost growth

MANCHESTER, and other major cities like it, could play a huge role in ensuring national prosperity – but only if the Chancellor uses his Budget to help them, according to pro.manchester’s John Ashcroft, who has set out a Budget for Greater Manchester.

 

In the Greater Manchester Budget, which will be delivered today, Manchester-based economist Dr Ashcroft will call on George Osborne to:

-Spend £20bn on infrastructure across the UK, a quarter of which would be spent in the North West and £2.5bn in Greater Manchester

-Create £100bn of SME and Commercial Real Estate (CRE) bonds, funded by quantitative easing gilt redemptions, dividend payments and a modification of the Funding for Lending scheme

-Cut the top rate of tax to 40% and limit the top rate of NI to 10%, to maximise revenue

-Further reduce corporation tax and announce a floor rate of 20% in 2015

-Relax air passenger duty on business-related travel

-Promote inward investment – including by increasing funding for vehicles such as MIDAS – with a concentration on Europe, North America and China – the dominant trading blocks now and in 2050.

 

In doing so, Dr Ashcroft says the Chancellor would stimulate the economy in Manchester and other major cities, reducing the deficit by generating growth and increasing revenue for the Treasury.

 

He said: “It is time to drive recovery up the M6 to other places as well as London and the South East and create the conditions to rebalance the economy.

 

“The London economy is six times the size of Manchester, but the devolved transport funding is 170 times greater… It is time to put a stick in the London wheel and allocate more to the Manchester economy.”

 

Without these interventions, growth will reach no more than 1%, with manufacturing and construction experiencing no growth to from net trade, according to Dr Ashcroft who said borrowing will therefore remain the key policy challenge, with debt set to hit £1.5trillion by the end of 2015/16.

 

Dr Ashcroft said allocating £0.5bn on infrastructure for Manchester – with social housing, schools, roads and infrastructure key targets – is reasonable, and would equate to £20bn spending nationwide, with little impact on net borrowing.

 

SME and CRE bonds, issued by the banks and purchased by the Bank of England, guaranteed by HM Treasury, would offer low coupon five, 10 and 20 year money with a sectoral target focus, he added.

 

In light of the £400bn spent on quantitative easing and £80bn allocation for the Funding for Lending scheme, £100bn for these bonds “would not be a huge ask,” Dr Ashcroft said.

 

Reducing the top rate of tax to 40% and limiting the top rate of NI to 10% – creating a maximum total take of 50% – “would be a positive step to maximise revenue,” Dr Ashcroft said, adding that further steps should also be taken to work towards the £10,000 tax threshold.

 

Meanwhile, the region’s entrepreneurs say the Chancellor’s budget needs to do more to support home grown British businesses. 

 

Sara Jones, co-founder of www.Hiring-Hub.com, a Manchester-based online business, said: “We need the government to stick up for the little guy. Small businesses are the backbone of Britain and if there is no public spending stimulus it is the only sector where growth is going to come from. 

 

“We need more tax breaks for small firms, less onerous employment red-tape and more incentives for digital and green businesses. If the government wants to stick to its austerity plan then it must do more to promote free enterprise in order to stimulate growth. Free markets will deliver growth but they need to be unleashed to develop.

 

“We also need to ensure that money and investment flows to small and growing business, so they can develop, create jobs and become the big businesses of the future.

 

“The Government’s SEIS initiative is helping, giving tax breaks to investors, but it needs to be promoted more. I would like to see the Chancellor further incentivise investors at the sub-£250,000 level, because their cash could prove the oxygen that small businesses need to breathe and flourish.”