West Midlands manufacturer urges Chancellor not to bow to Opposition pressure for radical announcements in his Budget.
In the build up to George Osborne’s budget announcement on Wednesday 20 March, Jonathan Duck, CEO of flooring manufacturer Amtico International says that the best Budget for manufacturers will be a “boring” one.
“The broad strategy of aiming to reduce the government budget deficit remains correct,” Mr Duck told TM. “The best budget will be boring, featuring neither major tax nor major spending changes.”
Duck acknowledges that this will be politically difficult for the Chancellor to deliver “because Opposition pressure is to do something radical, but this would not be responsible.
Bucking common calls for more investment and spending from government to stimulate the economy Duck says, “Borrowing and spending a lot more now, to give the illusion of growth, is completely incorrect. We had enough of this in the past, thank you very much, and are living with the consequences now.”
Backing up his position, Duck went on to say, “Remember the way GNP is measured is that if you borrow to spend, the spending counts in GNP, but the borrowing is not taken off until you have to start repaying the loan. This encourages political recklessness.”
Duck commends existing measures to address hurdles for growth. He says the Funding for Lending Scheme, for example, is a step in the right direction and a sensible attend to “dyno-rod the blocked banking plumbing.”
However, Duck says that much of the finance freed up through this scheme is currently going into property lending.
“This is not productive investment, though it makes voters feel better. The funds need to go to new business investment,” states Duck.
One area where Duck would like to see bold action is on national insurance.
National press coverage today promised that a £100m national insurance loophole on this tax will soon be closed. But Duck would rather see an extension of tax breaks in this area on Wednesday.
“National Insurance remains the usual tax on jobs,” says Amtico’s CEO. “If you add up all NI, paid by the employer and employee, and income tax paid by the employee, you will find tax is about 40% for incomes over £8,000 per year.”
This is particularly debilitating for manufacturers argues Duck since the “cost gets embedded into our cost of making things, and does little to help our international competitiveness.”
Building on the competitiveness theme and raising a final area where the Chancellor could make a real difference to Amtico Duck round on ill conceived campaigns to boost UK manufactured exports.
While supporting the concept of export growth in theory, Duck says competitive international growth for Amtico is hampered by excessive import tariffs.
“We pay five to six per cent on importing raw materials and exporting flooring to or from the US this rises to 60% when exporting to Brazil.
“The US government is pushing to drop EU tariffs with something called the Transatlantic Trade and Investment Partnership. It would be nice to see the UK government do something similar and move from rhetoric on exporting to BRIC nations like Brazil, to the action of actually getting high tariffs reduced.”
A the moment, Duck cynically observes that the only way government is really helping boost exports is by turning out “muddled and changing budget policy” with the consequence that the Sterling becomes ever weaker – thus aiding exporters in some markets.