George Osborne has a daunting job on his hands: how to create growth with a rapidly shrinking pot of cash? What money there is has to be spent wisely, that is on initiatives able to stimulate further private sector activity on big ticket items – hence the business communities interest here. So think investment in transport, digital infrastructure and even housing. These will also help attract foreign investment too.
Government is also saying businesses need to be better at exporting, so it’s a case of speculate to accumulate to enable this, and that could be in the form of UKTI investment. We certainly don’t want to see the DBIS budget hammered either – this would be madness when we need to be encouraging small business growth not dismantling the department that’ll help drive the momentum for this.
Also we need a clear direction on the skills agenda – how much funding will be devolved to the localities, how the apprenticeship reforms will change the skills landscape. We support re-routing funding through employers but the mechanism must not place heavy admin burdens on employers.
Clearly government are depending on private investors to grease the wheels of economic recovery, but businesses will want to hear the right noises from the Chancellor if they are to put their hand in their pockets.
The announcements therefore must have clarity of message, real financial commitment on the public side, and reassurance that the current policy direction is a long term aspiration that can deliver in the short and medium terms.
Government has to adopt a business-like frame of mind; focus less on political cycles and more on making a clear case for investment that is long term and will deliver value for money. If they fail to do that then businesses will rightly be reluctant to invest, and that could have huge implications for the recovery.
After taxation policy, this is the most important routine task carried out by government and now more than ever, it’s crucial they get it right.
The announcement on funding for the Single Local Growth Fund, the scale of which will also be announced as part of the Spending Review will be a clear signal on whether government believes in the concept.
Devolving key central funds as part of Growth Deals to the 39 Local Enterprise Partnerships will signal to employers that the government is committed to local growth driven by the private sector. But the funding will have to be meaningful. Anything less than what Heseltine suggested will be just a half hearted gesture and pointless.
Labour have already said they will follow the Chancellor’s spending plans if they are voted in at the next General Election, making Wednesday even more important as what’s announced is going to be for keeps. No pressure George.