BCC makes Pre-Budget Report recommendations

Business group gives chancellor PBR wish list

28 September 2009 09:32

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Business group the British Chambers of Commerce (BCC) is to present the chancellor with a series of recommendations ahead of the Pre-Budget Report (PBR).

The BCC submission outlines the short-term measures the organisation believes are necessary to combat the effects of the recession, and the longer-term measures that will sustain recovery and foster growth.

The group argues that the risk of the economic situation worsening once more remains high, and its proposals include an extension to the Enterprise Finance Guarantee (EFG) scheme beyond March 2010, to ensure businesses have a continued access to capital.

The BCC is also asking the chancellor to extend the temporary reduction in VAT to January 4 2010. VAT is currently scheduled to reverse back to 17.5% from 15% on January 1 2010.

The group’s director general, David Frost, will present the BCC's recommendations, which also include extending the quantitative easing (QE) programme to £200bn, from the current £175bn ceiling, at a meeting tomorrow with Alistair Darling in Brighton, where the Labour Party is hosting its annual conference.

David Frost said: “Extending good initiatives like the Enterprise Finance Guarantee scheme, and expanding the size and scope of the QE programme will help.

“Once out of recession, government must allow the private sector to continue driving recovery, by maintaining spending on vital business infrastructure, removing tax and regulatory barriers to growth, and refocusing our economy from public spending and consumer debt to trade and enterprise.

“Our submission takes full account of the pressures on the public finances and makes sensible, realistic arguments for where limited public money should be spent going forward,” he added.

The short-term proposals in the PBR submission include:

The Bank of England should raise the quantitative easing programme’s ceiling to £200bn and purchase more company debt. Persistent weakness in lending to business poses serious risks, and on this basis, a negative interest rate on commercial bank deposits held at the Bank of England should be considered.
The Enterprise Finance Guarantee scheme, which has been successful helping firms operating at the margins of bank lending during the downturn, should be extended beyond March 2010. Enough cover should be made available to ensure the scheme can meet demand from all eligible applicants.
In recognition of the challenges facing retailers and small firms during the busy Christmas period, the government should move the VAT switch back to 17.5% to Monday 4th January 2010. This short delay ensures a minimum fiscal impact, while giving small firms an essential weekend to prepare.
To ensure that more SMEs receive the reliefs they are entitled to, government should follow through on proposals to make Small Business Rate Relief payments automatic. This could be accomplished at no cost to the public purse.

Key longer-term proposals include:

Maintain real-terms capital spending for transport infrastructure over the next Spending Review Period, and develop a realistic long-term spending guideline post-2014 – giving businesses confidence that vital transport projects will be funded, despite the public spending climate.
Scrap the increase in employer National Insurance Contributions, planned for 2011, which is a tax on jobs and recovery. The £2.65bn shortfall should be made up through targeted public sector spending cuts, changes to public sector pensions, and changes to benefit payments.
Introduce new-generation Enterprise Zones with reduced regulatory (and possibly tax) burdens to promote international trade, business start-ups and growth in areas facing severe industrial restructuring.