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16 November 2015 Insight

Decision time for the government

The chancellor’s decisions in the spending review and the autumn statement will reveal whether the landscape for business has changed.

At the CBI’s annual conference, the prime minister spoke of his ambition to lead “the most business friendly government in Europe”. On the same day, the chancellor promised to “prioritise investments in our economic future”. The spending review/autumn statement combo on 25 November will reveal whether the policies match up to the pledges, or whether the landscape for business has changed.

Tough decisions will need to be made by the chancellor in the spending review if he is to find the £20bn-odd savings from departmental budgets that was pencilled in at the summer budget in order to get rid of the fiscal deficit. But, as anyone does when needing to rein in their spending, he will have to think carefully about which areas of government spending will be spared the axe.

The CBI has been clear in its spending review submission that “growth-enhancing spending” – innovation, infrastructure, skills and exports – must be prioritised. These are the key ingredients to reviving our flagging productivity and securing our economic recovery.

Supporting private-sector led growth

The same is true for the autumn statement. Business has always been clear that sustainable growth depends on sustainable public finances. They recognise that the government can’t duck its responsibility to get the deficit down from its current level of over £80bn.

But healthy public finances also depend on a growing economy – and the CBI has long stated that the deficit will not come down unless the approach to balancing the books is one which supports private sector-led growth.

It is through that lens that businesses will be keeping an eye out for measures in the autumn statement which might impede them from investing and growing, particularly given the chancellor’s recent tendency to shift responsibility onto business – think of policies such as the national living wage and the apprenticeship levy.

And it’s not just new measures which businesses will have their eye on, but also areas likely to be conspicuous by their absence, such as meaningful reform to the burdensome business rates regime.

Businesses recognise that they have an important role to play in achieving a high wage economy and in funding our skills system. But their ability to fulfil this role relies on productivity growth and a landscape that supports business opportunities.

They need the chancellor to live up to his words – and those of the PM – when he stands up at the despatch box on 25 November.