It’s a slow burn. But a steady budget could spark a successful start for the new Industrial Strategy with measures to ignite short-term confidence and long-term growth
“Prioritising stability will inject further confidence in the economy now,” says CBI chief economist Rain Newton-Smith. A budget that fuels businesses’ growth ambitions, together with a long-term Industrial Strategy, could boost the country’s future productivity and prosperity.
The Government’s new Industrial Strategy is an opportunity to set out ambitious plans for the UK economy for decades ahead. It could help fix the country’s productivity problems and remove the regional inequalities that have dogged our country for generations, making a real difference to living standards, wages and people’s future opportunities. Brexit isn’t the only game in town when it comes to the business community’s priorities for 2017.
The Government should provide additional guidance for smaller firms
But if we’re to be competitive post-Brexit we need to make sure Britain remains a great place to do business. Businesses want the Government to use the R&D tax credit and Levy Control Framework to do this, giving more detail on how the National Productivity Investment Fund and the promised £2bn for R&D will be spent. “The R&D tax credit system has strong support. The Government should provide additional guidance for smaller firms so they can make the most of the system more easily,” says Newton-Smith.
The Government should also use this budget to prioritise delivery of planned local and digital infrastructure projects, with timelines. Because changes in local productivity could help families and communities across the UK, not just London and the South East. The differences in productivity between UK regions, towns and cities are vast. If each area could increase its productivity at the same rate as the top performer in its own region, we could see an increase of 10 per cent in the size of the UK economy by 2024.
The North of England has a potential working population of 16m
Better infrastructure means better transport between our towns and cities, boosting the potential local workforce. The North of England has a potential working population of 16m – the same number within one hour of London – who could be working across the whole region if good transport was available.
We also need to help young people get into work, by making sure regional education and skills training meets local demand, and by treating the first two years of the apprenticeship levy as a transition period while delivering a genuinely employer-led system. The Government should commit to a funding plan for high-value technical education reforms for 16-18 year olds, as recommended by the independent Sainsbury review, and boost funding for Opportunity Areas to improve social mobility, particularly in rural and coastal areas.
Business and government working together will give us a more prosperous and fairer society
Business and government working together will give us the best chance of creating a more prosperous and fairer society. But, “In a more challenging economic environment, the Government must be careful not to put further pressure on firms,” says Newton-Smith.
The Government must clarify long-term intentions for financial services taxation, review the scope and effectiveness of capital allowances, and tackle the UK’s outdated business rates system. Immediate action is needed to underpin stability in defined benefit pension schemes.
A new Industrial Strategy can help tackle some of the root causes of inequality. It’s not about writing cheques to businesses and hoping for the best, it is about creating regional and sectoral centres of excellence that strengthen our economy, create higher paid jobs and help us trade across the globe.
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