Budget 2012: Nothing meaningful to support British industry
We know – because the leaked letter from Business Secretary Vince Cable to the Prime Minister told us so – that there is concern at senior levels of Government about the lack of “a compelling vision of where the country is heading”. Vince Cable, quite rightly, told the Prime Minister that “we can be more strategic, and the economic backdrop will increase demands that we are ambitious”. Vince also told the PM, again correctly, that “market forces are insufficient for creating the long term industrial capabilities we need.”
As the Chancellor began his Budget speech today, I wondered if Vince’s message had got through. Early in his speech, George Osborne told the House of Commons:
“We earn our way in the world if we stop being afraid to identify Britain’s strengths and reinforce them, backing industries, like aerospace, energy and pharmaceuticals, creative media and science. A deliberate strategy to create a more balanced national economy, where financial services are strong, but they are not the only string to our bow.”
Obviously excited by this, I waited to hear the details of how this new, rebalanced economy would come about. An hour later, when the Chancellor sat down, I was still waiting. Undaunted, I went to the ‘Red Book’, the 114 page document that sets out every Budget measure introduced, whether included in the Chancellor’s speech or not.
What did I find? An 11-page section entitled, ‘Reforms to support growth’. This is broken down into four sub-sections: encouraging investment and exports; making the UK the best place in Europe to start, finance and grow a business; creating a more educated workforce; and creating the most competitive tax system in the world.
This 11-page section includes a lot of things that aren’t bad in themselves, but they simply don’t add up to much. We learn, for example, that as part of its export drive, the Government “will help secure temporary private sector office space overseas for new UK exporters in high growth countries where such services are difficult to obtain”. There’s nothing wrong with that, its surely helpful. But I don’t imagine the world’s powerhouse economies, like China, India, Brazil, the US and Germany are quaking in their boots at this new initiative from the competition in the UK.
From a first impression (although I’d like to see more detail before I draw a final conclusion on these), the best bits of the Budget for growth are those highlighted on the BIS website. These are: the £100m University co-investment fund to encourage universities to leverage in private sector, or charity, co-investment in long-term research partnerships; a £60m investment to establish a UK centre for aerodynamics; and £100m to increase the supply of capital for SMEs through non-bank channels. In addition, we have an Independent Review of Competitiveness to be carried out by Michael Heseltine and an announcement that the final two Catapult Centres (that’s Technology and Innovation Centres to you and me) will cover transport systems and future cities. Again, it sounds good, although £260m is not a lot of cash and it’s hard to see it stretching very far.
But it doesn’t end there. Alongside those bits on growth that aren’t bad, just uninspiring, there are other bits that certainly are bad. Government plans to “scrap or improve” 84 per cent of health and safety regulation are hardly something to crow about. In what way will some of it be improved? I hardly expect it to be strengthened. Worst of all, the Government trumpets a below inflation increase in the National Minimum Wage on page 46 of the ‘Red Book’, then on the very next page, hails the cut in top rate tax to 45%, claiming them both as pro-growth measures.
In February, Vince Cable called on the Prime Minister for a growth policy that was both more strategic and more ambitious. After this Budget, Vince – like the rest of us – is still waiting.