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East Midlands Chamber News

Chamber Calls for Shift Of Priorities in Spending Review

George Osborne - ©Altogetherfool (flickr.com), licensed under CC BY-SA 2.0On the day that Chancellor George Osborne is set to announce fresh cuts of up to £11bn in his latest Spending Review, here's a reminder of what DNCC is calling for.

The region’s biggest business organisation today calls for a radical shift in Government spending to get the economy back on track.

Derbyshire and Nottinghamshire Chamber of Commerce (DNCC) is urging the Chancellor to move Government money away from unproductive current spending and towards the capital investment needed to underpin economic stability, job creation, exports and growth.

Its submission for the Government's forthcoming 2013 Spending Review calls for measures to improve access to finance for growing businesses, boost exports and pump major investment into house-building, road maintenance and infrastructure.

It's based on extensive research into business’ priorities for the Spending Review, from which the following three clear messages emerged:

1) Lower public spending matched by lower taxes would deliver the best outcome for the UK economy:
Preferred Business Options For The Economy

  • Almost half (42%) of businesses ranked the reduction in public spending and taxes as their preferred option to boost the health of the UK economy

  • This compared to only 13 per cent of firms who listed higher public spending and higher taxes as their first choice

  • DNCC believes maintaining departmental ring-fences for short-term political gains is not consistent with a long-term vision of a low-tax, enterprise-friendly and internationally-competitive economy.
  • 2) Economic development, education and transport ranked as businesses’ top three areas for Government spending. Foreign aid and social security are the lowest priorities:

    Business Priorities For Government Spending

  • Economic development (which includes trade promotion and business support) came out as the top priority for Government spending at 68 per cent, with education second (57%) and transport third (47%)

  • Only one per cent see foreign aid - currently protected by a ring-fence from cuts - as a priority area and only six per cent see social security - the largest area of spend - as a priority for Government spending

  • Whilst DNCC is not calling for the protection of any specific Whitehall department budgets, it reiterates its long-standing call to shift state spending towards supporting the most productive elements of the economy.
  • 3) The present balance between capital investment and current spending is far out of line with business perceptions and expectations:

    Business Perceptions About Government Spending
    • On average, UK businesses wanted to see a 3:1 split of current and capital spending in budget allocations after learning of the actual ratio, which is closer to 13:1.
    • This suggests businesses would like to see a massive boost to capital expenditure, which would require a radical reprioritisation of government budgets.
    • DNCC is calling for a greater focus on investing in capital assets including transport, energy, education, digital and other local economic infrastructure, such as road maintenance and house building.

    DNCC has identified a package of measures – costing approximately £8bn-a-year – which would lay the foundations for a lower-tax economy and refocus unproductive expenditure towards investment which underpins economic stability and growth.

    It has also identified a number of ways – within the current spending envelope – to offset these additional costs to the Exchequer.

    Chamber President Ian Greenaway said: “The 2013 Spending Review is the Chancellor’s last chance to make a real difference to the health of the UK economy this side of the next general election.

    “Infrastructure, economic development and skills are the bedrock of an enterprise-friendly economy and our Spending Review submission – based on the opinions of our members – highlights the pressing need for a drastic rethink on Government spending priorities.

    “It’s unacceptable for Ministers to continue to ring-fence certain areas of spending for wholly political reasons. It’s also unacceptable that programmes which do little to boost UK output are being protected at the expense of capital investment, the maintenance of key assets and tax cuts to spur long-term growth.

    “Businesses in Derbyshire and Nottinghamshire are crying out for more support to help them drive growth, boost trade overseas and create jobs and wealth. The Chancellor must be brave, listen to the business community and seize this opportunity to go all out for growth.

    “MPs of all colours must remember that business owners and company directors make up a significant proportion of the electorate and what politicians do now could influence the ‘business vote’ in 2015.”

    Further information is available in the Chamber's full Spending Review submission.