Business prospects on tightrope

Mar 24 2010 by Andrew Sugden, The Journal

IT can't have escaped your notice - today is Budget day, the Chancellor’s annual day in the limelight.

Hitting the brakes to stop last year’s recession through quantitative easing and financial stimulus has left us with a massive public debt that needs addressing. The UK economy is about 6% smaller than it was in mid-2007 and growing timidly, so tax receipts are down.

That leaves Alistair Darling with little choice but to raise taxes and reduce public spending. With an election almost certain to take place on May 6, and the UK economy still fragile in its recovery from the worst slump in decades, Mr Darling will be attempting to walk a tightrope between his party’s electoral chances and those of a ‘double-dip’ recession.

For businesses that is an ominous combination. Consumer and personal taxes are transparent and hit the pocket of every voter in the land. Business taxation is a lot less visible and cutting investment in the infrastructure of our country an obvious if short-sighted means of reducing public spending. In this region, we must be prepared for leaner times.

It’s for this reason the North East Chamber of Commerce has said all policies created this year, including the Budget, must pass an economic recovery test. Our economic recovery will be sustained through businesses creating more jobs and contributing taxes that go on to pay for the public services and investments we need.

So when the Chancellor stands up at the Despatch Box, we’ll be looking for some crucial announcements. We’ll be hoping for clarity on how the public finances will be addressed and taxation needed to support this.

We’ll be hoping to hear plans to increase National Insurance contributions, simply a tax on jobs, are to be reversed. This should be accompanied by maintaining the temporary increases to capital allowances made last year. Together these measures incentivise businesses to create more jobs and make investments that will hasten and sustain the recovery. And we will be keeping an eye on plans to cut infrastructure spending. It’s not just the Chancellor who will be walking a tightrope, the prospects for North East businesses will be too.

Andrew Sugden is director of membership and policy at the North East Chamber of Commerce