Business leaders issue manifesto for recovery

PUBLIC spending cuts and budget deficit reduction must be the first priorities of the new government, business leaders have said.

Commentating on Labour’s election manifesto, published yesterday, Miles Templeman, director-general of the Institute of Directors, said: “What is most striking about the manifesto is what is missing.

“We simply can’t see how the deficit is going to be tackled quickly enough if the Government is only prepared to identify as little as £10bn of spending reductions.”

He said businesses needed to know now whether Labour intended to announce further spending cuts or additional taxation such as the increase to NI – not after the election.

“We are concerned that yet again ministers are taking the UK’s flexible labour market for granted. Abolition of the Default Retirement Age removes flexibility for employers while creating a new right to request flexible working for older workers and extending paternity leave risks creating new inflexibility,” he added.
 
“We are also very concerned about the language used around the proposals relating to the minimum wage.

“Businesses can probably live with increases in line with average earnings, but any increase above this rate, which the manifesto leaves wide open, would compound the problem created by the NIC hike.”

The IOD has published its own Business Manifesto, which calls for an emergency Budget setting out a clear plan to bring down the deficit, with specific public spending; a Bill to kick-start school reform and introduce greater competition into educational provision; and moves to bring down the cost of regulation.

John Phillips, IoD West Midlands regional director said: “There is a malaise hanging over the UK economy, and the challenges facing the country are deep and numerous.

“A new government needs to have a bold programme over the next parliament to restore the UK’s competitiveness. It is also vital that it acts decisively and early to address the challenges.”

According to the IoD these challenges include: a budget deficit of around £178bn; a complex and uncompetitive tax system; falling educational standards; declining labour market flexibility; increasing levels of employment regulation; an over-complex pensions system; a congested road, rail and airport infrastructure; and almost a decade of falling public sector productivity.

Mr Phillips said: “It will take brave and disciplined government to solve these challenges. Getting the major policies right in the first 100 days will be crucial.

“That needs to be followed by a sustained reform effort throughout the next Parliament.”

The IOD is calling for: a freeze on public spending in real terms for the next decade and a new fiscal target to reduce it to 35% per cent of GDP by 2020-21; reductions in the main and small companies’ corporation tax rates, down to 15%; a reversal of the proposed 1% increases in NI and a roll-back of the planned income tax increases.

It also wants an increase in competition in education and simplification of the publicly-funded skills system; the introduction of a minimum £500 deposit in employment tribunals to deter weak cases; companies to be able to use agency workers during strikes; a raising of the state pension age to 70 as soon as practicable; the construction of a third runway at Heathrow; responsibility for financial regulation and supervision to be transferred from the FSA to the Bank of England.

Finally, increases in public spending should only happen once improvements have taken place in public sector productivity.

Mr Phillips said: “If implemented, the policies set out in this manifesto would radically transform the UK’s economic prospects, calm fears and signal a
determination to get the country back on the right track.”

Much of this was echoed by the CBI.

John Cridland, the CBI’s deputy director general, said in response to Labour’s manifesto that the next government had to set out a clear and robust plan for restoring public finances and balancing the budget deficit as quickly as possible.

He said business taxes needed to be competitive and the CBI believed this required real reductions in the business tax take in the medium-term.

A growth agenda also needed to be established around the low-carbon economy, he added.

He agreed that public sector reform was vital, while changes to the retirement age should not be rushed through.

On the national minimum wage, he said this was a matter best left to the independent Low Pay Commission.

Similar to the IoD, the CBI has set out its own list of priorities for any new administration. It has said these must be implemented within 100 days of the new government taking power.