Budget 2010: Business leaders urge return to competitiveness

BUSINESS leaders across the West Midlands have told the Chancellor to forget quick-fix gimmicks in tomorrow’s Budget and to concentrate on introducing measures that will restore UK competitiveness.

The Institute of Directors has urged a clear trade-off with tighter fiscal policy permitting looser monetary policy.

West Midlands chairman Richard Boot stated: “The fiscal tightening needs to start sooner rather than later.

“You might think that a cut in public spending would reduce GDP. But we need to look ahead to the second round effects.

“A fiscal contraction could benefit economic growth if done correctly. This is especially the case now, with the enormous budget deficit.”

“The fiscal tightening needs to focus on less spending, not more taxation. We need to achieve a public spending to GDP ratio of 35% by 2020. That means maintaining a real-terms freeze in public spending for the next two Parliaments. Any improvement in funding must be obtained from higher productivity growth,” he added.

On the tax side, the IoD said it wanted to see a clear commitment to steady reductions in corporation tax rates, with a target of 15% by 2020.

“This is needed to restore the UK’s international competitiveness, and to persuade multinationals to choose the UK for their operations,” stressed Mr Boot.

“We need a commitment to phase out the 50% income tax rate, and to reverse the planned increases in national insurance, as soon as possible. Britain must not come to be labelled as a high-tax country.

“We do not want to see new gimmicks in the tax system, minor reliefs that would only distract us from the big task of restoring competitiveness.”

Jonathan Dudley, managing partner at Midlands accountants and business advisers Horwath Clark Whitehill, said he expected the Budget would be in effect “a party political broadcast by the Labour Party”.

“It is going to be a case of – ‘you’re a pensioner; here’s some money and make sure you vote for us’,” he said.

“And similarly there will be no early halt to public spending – they won’t change anything until the mini-Budget after the election.”

James Watkins, executive director of lobby group Business Voice WM, pleaded for an initiative on credit insurance.

“The continuing problems accessing credit insurance is hitting retailers and exporters,” he said.

“Until firm action is taken by the government, whichever party is in power after the election, the economy will face ongoing difficulty in getting out of the economic downturn.”

Andrew Shaw, national tax managing partner for BTG Tax, part of the Begbies Traynor group, predicted it would be a Budget for floating voters.

“We’ve already had the 50% tax band on income tax and I think after the election we will see both capital gains tax and VAT go up, but they can’t raise them beforehand. And, given the parlous state of public finances, they can’t give away much either,” he said.

“Petrol is due to jump 3p a litre in April but they might just defer that. Then there will probably be a few little giveaways – maybe something for pensioners and the young unemployed to encourage them to vote Labour.

“But it is quite a difficult Budget to call.”