By Marcus Leach
The Chancellor was absolutely right to stick with his Plan A in fiscal policy because it is difficult to imagine a worse time to renege on the spending squeeze, according to the Institute of Directors (IoD).
“The Chancellor stuck to his guns today, and that was the right thing to do. No-one is pretending that it’s going to be easy or painless, but there’s no credible alternative to the deficit reduction plan. We wanted Plan A with more infrastructure spending, and that’s what we got. I believe business confidence will have been boosted by today’s announcements,” Simon Walker, Director General of the Institute of Directors, said.
The IoD commented on the following announcements:
The introduction of credit easing will be welcomed by businesses up and down the country. This is an imaginative scheme which should helpfully reduce the cost of capital for companies. It also provides an incentive for banks to increase lending before the scheme becomes operational, because their subsequent allocation will be determined by their existing loan book. The new mid-size financing arrangement is also welcomed as a further attempt at creating alternative sources of funding in the wake of the financial crisis. However this may take time to be fully implemented.
The publication of the National Infrastructure Plan and the memorandum of understanding with UK pension funds are very welcome. If we are to deliver the 500 projects and £250 billion of investment required over the next decade, a significant increase in private capital is a must.
Aviation capacity is a priority for IoD members and the Autumn Statement commitment to explore all options for maintaining the UK’s aviation hub status is welcome, albeit somewhat vague.
The instruction to the Pay Review bodies to consider the regionalisation of public sector pay, and how to make it more responsive to local labour market conditions, is a potentially radical development. The IoD had called for this in its Autumn Statement submission.
The injection of new money into free schools is a strong vote of confidence in the programme. But we still think wider reforms are required to unlock the true potential of the programme, such as planning reforms and profit incentives for private investment to take-off.
The Government’s recent announcements on employment law reform are welcome but limited. It now needs to drive through radical reforms of the dismissal process.
On the tax front, the extension of small business rate relief for an extra six months is welcome - from October 2012 to April 2013.
The seed enterprise investment scheme may help to raise equity capital, but we would still prefer to see lower tax rates across the board.
The package of measures to support energy intensive users fails to address the policy induced increase in energy costs for all businesses.
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