EEF calls for the budget to include a ‘Growth Mandate’

Posted on 27 Feb 2011 by The Manufacturer

In preparation for the upcoming budget, EEF, the manufacturers’ organisation, has sent a clear message to Government about the strategies it considers are needed for growth.

According to EEF, the Government should set out a ‘Growth Mandate’ to match its Fiscal Mandate. This, it says, will be critical to giving the business the confidence to grow, invest and create jobs in the UK. In addition the organisation says the Government must show it is serious about promoting growth by matching the transparency of a mandate with specific measures in four key areas: tax; regulation; access to finance; and skills.

“The fiscal mandate has reassured business about the stability of the public finances,” said EEF Chief Executive, Terry Scuoler. “Government must now send the same signal that it is serious about enhancing the competitiveness of our business environment by matching this with a robust Growth Mandate.”

“This should demonstrate that all parts of government are working together to deliver the kind of growth our economy needs and, that it will focus on this task relentlessly over this Parliament.”

According to EEF, like the Fiscal Mandate, the Growth Mandate should span the lifetime of a parliament with each subsequent Budget and policy announcement showing further incremental progress. This multi-year view must be taken where the barriers to growth are gradually dismantled.

Each Budget would therefore report, relative to the previous one on the following measures:

• The change in total tax costs faced by businesses
• Estimates of the net change in bank and non-bank external finance to non-financial companies
• The change in total climate and environment policy costs faced by businesses
• All new and withdrawn regulations, and the change in the total cost of all regulation
• The change in the proportion of companies facing skills shortage and hard-to-fill vacancies
• The change in apprenticeship starts at each level

In addition, EEF believes the Budget statement should also highlight how these actions are feeding into changes in output measures, such as comparisons on innovation activity and export market diversity.

EEF is also urging the Chancellor to take the first step in supporting private sector efforts to invest innovate and export by delivering an internationally competitive business environment. A failure to address this risks losing crucial future investment by UK-based companies overseas, as well as inward investment. In response EEF has made the following recommendations in four key areas:

1. Tax
– Reform the R&D Tax Credit to take into account development costs
– Modernise the Capital Allowances regime so that it recognises the true cost of re-investment by manufacturers
– Minimise the cost burden of environmental taxes. In particular, ensure a Carbon Tax is conditional on reductions in other energy taxes.
– Extend the remit of the Office of Tax Simplification to make structural changes to the tax system which will deliver major simplification for business

2. Access to Finance
– Introduce independent monitoring of banks adherence to lending principles
– Commit to an action plan for the recommendation of the Independent Banking Commission on measures to strengthen the banking system and increasing competition
– Examine future measures to increase the development of alternative sources of finance, especially non bank debt and venture capital

3. Skills

– Review future funding and demand for 14-19 diplomas with the aim of increasing support and improving delivery
– Introduce a pilot initiative through the Growth & Innovation Fund to support SME collaboration on industry placements

4. Regulation

– Review the cumulative impact of thresholds for regulation and commit to further action on reform as appropriate
– Inclusion of EU legislation in either a system of ‘one in one out’ or regulatory budgets
– As scope for simplification of individual regulations has largely been exhausted, commitment to structural reform of entire regulatory domains is needed
– Publication of all Regulatory Policy Committee opinions prior to parliamentary stages of legislation

“Whilst our economy might have entered this year in reasonable health, sustaining this and generating the right type of growth will be challenging,” said Scuoler. “Rebalancing our economy requires growth that is driven by innovation, investment and trade.

“Manufacturing can deliver this growth but firms can choose from a wide a range of locations and will only invest in the UK if we develop a business environment that can compete with the best in the world. The Budget and Growth Review must be the start of a Parliament-long project to put this in place.”