Why businesses need good Government
Sarah Green is the North East regional director of the CBI
FAST-GROWING businesses need a supportive policy environment. For many entrepreneurs, this does not mean incentivizing growth, it simply means removing the barriers to allow businesses to succeed. The coalition Government has outlined significant change – how does business view their approach?
Business has a strong interest in the success of the coalition – the last thing it wants is a period of political uncertainty. And it has been impressed by the speed and direction of policy-making to date.
This applies in particular to the Government’s determined efforts to get the public finances back into shape. June’s Budget was seen as bold and audacious, and it needed to be.
Although there are many risks and uncertainties ahead, the dangers of inaction on fiscal policy seemed to most business people to be even greater.
It is not just in economic matters that this Government is turning out to be more radical than expected. In the early days, the concern was that the price of agreeing a coalition would be hesitancy, and a tendency to choose the lowest common denominator in forming new policies.
If anything, the worry now is that the Government is attacking on such a broad front – with big reforms proposed in the health service, education, policing, welfare and more – that the process might start to become unmanageable.
Business has been particularly supportive of the approach to fiscal policy and corporation tax. Cutting Government spending, rather than raising taxes, is an approach we welcome.
The Chancellor has also recognised the importance of certainty and consistency in business tax policy and has set out a strategy to make the UK a more competitive place to do business in the years to come. Reviewing public sector pensions also gets the thumbs-up, since present arrangements are building very large liabilities for future generations of taxpayers and are completely out of step with private sector provision.
Areas of some concern include innovation/skills and energy security. Election pledges to ring-fence the health service and overseas aid, and subsequent promises to give relatively favourable treatment to education and defence, mean that unprotected departments could face truly savage spending cuts.
This is a particular threat to the Department of Business, and there is a clear risk that future growth prospects could be damaged if the cuts are so heavily biased in this direction.
The Government has not yet shown a sufficient sense of urgency about the need to develop a diverse supply of low-carbon energy at competitive prices over the next decade.
Further concerns are the continued uncertainty relating to banking regulation, which may create reluctance among the banks to lend. Areas of most concern include the transition from regional development agencies and local enterprise partnerships (LEPs).
Although the Government says LEPs are to be business-led, it is not clear where the real power will lie, we don’t know how many there will be or how they will be funded.
The CBI also has significant concerns on planning policy and the decision to abolish the retirement age will make workforce planning and staff development harder to manage.
There will be some testing times ahead for the Government and it is very early days but the verdict to date is that broadly we are moving in the right direction.
