UK Budget 2006 - BusinessThe business reaction to the Budget was distinctly luke- warm, with relief at the absence of punishing new taxes tempered by a sense that the chancellor had missed an opportunity to bolster his rhetoric on boosting Britain’s competitiveness with concrete measures.
Leading business figures were united in praising Gordon Brown’s emphasis on improving skills and education, including new initiatives to encourage entrepreneurship in young people.
“It is important that kids in Britain have some understanding of enterprise and business as part of their education,” Sir Richard Branson, the entrepreneur who founded Virgin Group, said.
Alan Wood, chief executive of Siemens, welcomed the funding of 3,000 more science teachers and the plan to benchmark science subjects.
But the plaudits for Mr Brown’s initiatives on education were countered by wider laments about opportunities missed in other areas. Business dismissed the chancellor’s apparent commitment to increasing Britain’s competitiveness and productivity as being largely political rhetoric.
John Patterson, managing director and chief executive of JCB, warned that “Britain’s manufacturers and exports will feel neglected. Their role was barely mentioned, their needs were not addressed and the immediate challenges they face from China and India not recognised”.
This damning assessment was echoed by leading business groups. Sir Digby Jones, director-general of the CBI employers’ body, accused Mr Brown of having “slapped himself on the back” but “done little to give a helping hand to those hard-pressed businesses which are currently under the cosh”.
The CBI welcomed Mr Brown’s pledge to rein back on specific departmental budgets in the next spending round, but said that “simply redistributing money within a spiralling budget is not enough”. The chancellor needed to curb overall public sector spending and reduce the business taxation burden, the business group said.
The Institute of Directors weighed in, warning that Britain’s rate of corporation tax – left unchanged by Mr Brown – was “not as competitive as it needs to be”.
The EEF manufacturers’ organisation said the best thing about the Budget was what it didn’t contain – the absence of any significant increase to the substantial business tax burden.
Martin Temple, EEF director-general, said it was disappointing that Mr Brown had failed to do anything to address the damage being caused by high energy prices and pension costs. He characterised the Budget as a “pick and mix” package, “strong on rhetoric but light on detail, with plenty of window dressing”.
This sense of disappointment also marked Mr Brown’s failure to take a more radical axe to red tape.
The chancellor used the Budget to set targets for cutting the burden of regulation imposed by the tax system, which he revealed costs business about £5bn a year. Business welcomed this initiative, as well as moves to liaise more closely with the sector over tax administration and to seek measures for further simplification, including potential reforms to national insurance. But industry leaders felt let down that the chancellor had not been more ambitious. Government-wide targets to cut red tape across Whitehall have been deferred until later this year.
“We wanted a reduction in the overall regulatory burden, with targets and time-scales announced for individual government departments,” said Bill Midgley, president of the British Chambers of Commerce.
Some Budget measures did win praise. Business applauded the extension of the research and development tax credit to medium- sized firms – a sector the EEF said had a “major role to play in raising the UK’s game on innovation”.
Mr Brown’s announcement of a revamp of UK Trade and Investment, the agency that promotes British exports and inward investment, was also welcomed. But business warned the focus on China and India, highlighted by the chancellor, should not come at the expense of helping exporters to less fashionable markets.
The green elements of the Budget went down less well. The Federation of Small Businesses said it was concerned by the increase in the climate change levy, which it said its members saw as a “straight tax, which does little to tackle climate change”.
The EEF complained of a “massive anomaly in continuing to penalise manufacturers with planned increases in the climate change levy . . . while petrol duties continue to be frozen”.
The overall business mood was summed up by the Forum of Private Businesses. While it welcomed some of Mr Brown’s announcements, it said the chancellor had “delivered a lacklustre Budget, which does little to address the urgent needs of smaller businesses”.
