Business View: Osborne wants to coax more from firms, but he offered few giveaways

 

Business Editor

Ed Miliband’s conference-season assault on the Coalition made backing business a hazardous activity for the Chancellor. Yesterday’s upgraded growth forecasts tell a story of a catch-up recovery, but that in itself will not deliver votes at the ballot box in 2015. George Osborne knows he needs these green shoots to blossom and the many to share the gains of the few.

But rather than taming big firms through clampdowns and regulation, he made it clear that he won’t be steered off a pro-enterprise agenda. Saying there would be no “writing cheques to ourselves” to boost progress, this was a financial statement containing a handful of measures to encourage business to earn more. With a bit of luck, they’ll be the ones writing the cheques – to the taxman – and aiding recovery.

You can see Osborne’s current concern. Critics of his austerity drive including the influential International Monetary Fund have been proved “comprehensively wrong”, he asserts. The deficit is falling and GDP is accelerating. The reduction in corporation tax to 20 per cent by 2015 has been cheered to the rafters and there is evidence that it is leading to headquarters relocating here.

Yet the growth we have today, far stronger than predicted in March, is led by increased consumer spending and the bubbling housing market. So although confidence has taken hold, the acid test by election time is to see if trade and investment can supplant those unsustainable sugar rushes to carry Britain through to a robust recovery.

Business investment is falling this year, not rising. Some say it should be interpreted as a lagging indicator – why invest when inventories can be run down? The alternate view is that businesses that sat on their hands during the recession are trying to reap the benefits of the upturn without yet loosening the purse strings – hence lacklustre wage growth, even if employment figures are surprisingly on the upside.

Infrastructure spending must play catch-up too, with the £25bn pledged by willing insurance companies this week a fraction of what is needed to pay for new roads and rail in the latest relaunch of the national infrastructure plan. There is a long way to go to match that pot of cash with the right projects, get spades in the ground and hard hats donned.

And then there are exports. In the same way that the budget deficit begins to be cured by cyclical recovery instead of structural reform, it is hoped that they will rally as huge emerging markets such as China change tack. Soon the Middle Kingdom will need more of the services and skills that Britain is expert on, instead of the nuts, bolts and widgets required for a building boom that favours sales from Germany.

Osborne is intent on doing more than awaiting end-markets to develop to suit our needs. Doubling export finance to £50bn strengthens the arm of trade minister Lord Livingston. Much of it is aimed at small businesses who haven’t carved out export markets before. Maybe then we will sell more goods to China than little Belgium and Luxembourg.

The Chancellor deserves only one cheer for his moves on business rates, a cause on which big business campaigned most vociferously. A 2 per cent cap on increases, but no fundamental reform until 2017, is a disappointment for retailers who are big employers too. Life gets easier for small shops, but it is the large chains that can play the biggest part in rescuing High Streets from decay.

Also missing was a much-discussed measure to let individuals divert their ISA savings into small businesses via peer-to-peer lenders such as Funding Circles. Why not, if access to credit is still seen as a block on companies expanding? Unblocking building projects, tax relief on some trading funds and social enterprise are welcome, but add up to tinkering at the edges. A £9bn crackdown on tax avoiders sounds suspiciously familiar. Will it actually work this time?

Of much more significance is the national insurance relief on employing those under 21. Every little helps to get youngsters into the workplace. This could be the tipping point to persuade small businesses they need to recruit. If it focuses more attention on the type of skills that firms require from school leavers, all the better.

So Osborne wants to coax more from business, but in return there  were few giveaways yesterday. Progress  has been made, but it’s not enough to merely hope that the recovery will rally from here on in.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee