Summary for businesses from CBI Director General - thoughts and analysis on the budget
23 Mar 2012
A snapshot from CBI's Director, John Cridland on the Budget, which he believes was right on the mark in being pro-business and pro-competiveness, with an eye to keeping the books balanced.
On the up side, the Chancellor painted a clearer vision of how the UK will earn its living in the future by seizing the opportunity to make sure our corporate tax system is more internationally competitive – something we have been pushing for. An extra one per cent off corporation tax this year could help with investment intentions and puts a rate of twenty per cent within reach. Plus, plans to reduce the top rate of tax to 45p by April 2013 will show our top talent that the UK is open for business and wants them to working here, creating jobs and growth. The sting in the tail we feared were potential changes to pensions tax relief for high earners, which, as a result of hard lobbying, didn’t materialise. And with many calls on the Chancellor to spend money he didn’t have, the best news for businesses is that he stuck to his guns and delivered a fiscally neutral programme.
On top of all this, we have been majoring on investment in infrastructure in the run up to the Budget, and the new planning framework we have been pushing for, with a presumption in favour of sustainable development, will be launched next week and should encourage local development to help boost growth. We welcome the commitment to support private sector delivery of world-leading broadband. On energy, we saw welcome steps to encourage investment in the North Sea with oil and gas tax relief, including for decommissioning oil rigs. This should give more certainty around decommissioning and new field allowances and help ensure our security of energy supply. There was promise of a new gas generation strategy which is much needed to join the dots on the Government’s approach to energy generation. However, a 33% rise in the carbon price floor will hit UK energy-intensive businesses hard and underlines the need for a more coherent strategy with urgently needed support to those companies most at risk from the energy cost increase. On transport, the government missed an opportunity to reinforce that the UK is open for business by going ahead with an 8% rise in air passenger duty. The UK’s tax on air travel is already the highest in the EU and this rise puts us at a competitive disadvantage.
It was good to see our creative sector get a special boost through the new tax credits for TV drama, animation and computer game firms. These highly mobile companies operate on a global stage, and their exports generate much-needed wealth and jobs. Similarly, the Government’s commitment to introduce an above-the-line R&D tax credit will make the UK a better place to do R&D and boost the visibility of the credit to international investment managers. And it’s good news that the government has listened to us on the need for a new approach to industrial policy. We will have plenty to say about this in the coming months, as this is one of our flagship policy projects for 2012. It was also encouraging to see further measures to support mid-size firms through the Business Finance Partnership.
The downside was in the area of deregulation. If the Chancellor could have taken the opportunity to get rid of the currently unworkable Carbon Reduction Commitment and replace it with an alternative measure. This might still be on the cards, but we will have to wait for the outcome of another review before we know – so we will keep pushing to get rid of this now overly bureaucratic scheme. And I think many businesses, especially smaller ones, will want the government to do more to cut red tape. There needs to be much greater urgency here to bring down the barriers to companies hiring staff and creating new jobs.
A fuller CBI analysis of Budget announcements is available at: http://www.cbi.org.uk/media/1363934/budget_2012_cbi_analysis.pdf