Article Dated: 12 Mar 2008

Reacting to the Chancellor’s Budget speech, Richard Lambert, director-general of the CBI, said:

“The Chancellor didn’t set the Thames alight, but then he didn’t have anything to set it alight with.

“On the surface there are no nasty surprises, but his growth assumptions are optimistic and leave him with no room for manoeuvre should things take a turn for the worse.

“Borrowing also looks set to rise by a further £20 billion over the next four years, which is a cause for concern. And by 2010/11, the impact of this Budget will be to raise total tax take by nearly £1.9 billion.

“The government has much to do if it is to win back its enterprise credentials, but the measures announced today are a credible first step on the road. Although the anger over capital gains tax is still simmering, entrepreneurs and smaller businesses will recognise that the government has made an attempt to listen.

“For business, although there may have been no further big shocks in today’s speech, we mustn’t lose sight of the whole raft of tax rises announced in the previous Budget and the Pre-Budget Report. These are scheduled to kick in from April, putting a further squeeze on firms at this already turbulent economic time.

On tax complexity, Mr Lambert said:
“107 new technical tax proposals don’t support the Chancellor’s claims to be moving towards a simpler tax system.”

Non-doms
“The Chancellor has made some worthwhile changes to core aspects of the non-doms proposals, notably leaving alone gains and income from assets in trusts kept offshore, and pledging to avoid double taxation issues. All this will soften the impact. However damage has been done to the UK’s reputation for tax stability and as a country which actively wants to attract talent and capital.

“When the legislation is finalised over the coming weeks it must be crystal clear, especially in relation to double taxation, in order to rebuild confidence in the system. This is particularly important if the welcome assurance that the regime will not be changed for several years is to have its desired effect of delivering certainty. Then it will be a case of waiting and seeing what the fall-out of the whole process and final proposals will be.”

Enterprise white paper
“The decision to delay income-shifting legislation is welcome. As drafted it would have been a tax raid on family-run businesses and would have placed an intolerable burden on the wider SME community.

“The promised radical measures to cap Whitehall departments’ ability to impose new regulations is greatly welcome. However to date this government’s delivery has fallen short of its regulatory promises so this pledge needs to be followed through in practice.

“We welcome improved access to finance, with the removal of the five year trading restriction in the Small Firms Loan Guarantee and the injection of new capital for the current year.

“Small businesses will be encouraged by the measures to improve access to public procurement contracts. We also welcome the uplift in thresholds for the Enterprise Investment Scheme which should encourage more investment in growth companies.”

Postponement of the 2p fuel duty increase
“The decision to delay the 2p increase will be a welcome relief to hard-pressed hauliers, businesses and other motorists, particularly since oil has leapt from $60 a barrel when the increase was announced to $104 today. The further half a pence rise from 2010 needs to be kept under review.
“In the longer term the government needs to level out the playing field for UK hauliers to compete with their foreign counterparts who enjoy far cheaper fuel prices.”

Air Passenger Duty
“Air Passenger Duty is a very blunt instrument and is ineffective as a green tax – that is the reason government gave for its decision to consult on an alternative ‘per flight’ tax. Yet today’s announcement that tax revenue from the new duty will increase by 10% in the second full year of operation seems to confirm fears the government sees this as a revenue-raising exercise, rather than as a genuine attempt to change behaviour.”

Green taxes on new cars
“While we welcome the broad approach, the pace and scale of the proposed new car taxes will present a sting in the tale for some manufacturers. The fact that this move will raise £735m will not build confidence in the government’s green measures – we need carrots as well as sticks to change behaviour.”

Zero carbon buildings
“The target that all new non-domestic buildings should be zero carbon by 2019 is the right sort of ambition – the CBI’s climate change task force highlighted buildings as major area of potential. Defining what constitutes zero carbon, and how we get there poses major challenges which need to be properly addressed in the consultation.”

Public service reform
“The Budget Report contains a welcome recognition of the importance of competition in delivering better quality public services and improving value for money. The Chancellor’s words on reform, like the prime minister’s earlier in the week, are a good sign but the government will be judged on its actions.

Promotion of science in schools
“Too many companies have serious problems recruiting individuals with science skills. Inspirational teachers are key to encouraging more young people to study science, while high quality careers advice is vital to show them that these subjects open doors to well-paid and interesting careers. So ‘Project Enthuse’ and a £6m campaign to promote science in school will be welcomed by business.”

Extra £60m funding for adult skills
“The expansion of ‘Train to Gain’ and the introduction of skills accounts should ensure public funding follows the needs of employers and employees more closely. The focus must be on developing the economically valuable skills the UK needs to compete – today’s announcement of additional funding for intermediate skills and adult apprenticeships is welcome, as employers’ skills needs are often at these higher levels.”

12 March 2008

Note:

The CBI is the UK’s leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. The organisation is also the UK’s official business representative in the European Union, which generates more than 50 per cent of regulation affecting British firms. With offices across the UK as well as in Brussels, Washington and Beijing, the CBI coordinates British business representation around the world