Coalition 'needs plan for private-sector growth'

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The Independent Online

Business Secretary Vince Cable has yet again come under pressure to reposition the country for growth, this time from an influential manufacturing body, over fears the Government remains too focused on cuts.

The EEF manufacturers' organisation will today call on the Government to present a "growth mandate" laying out measures to boost private-sector activity.

The call for targeted reforms to "dismantle the barriers to growth" adds to growing pressure on the Government to set out how it will secure the much-vaunted private-sector recovery it claims will make up for public-sector spending cuts.

The out-going director general of the CBI, Sir Richard Lambert, has blasted the Government for putting politics ahead of economics, claiming there is no vision for growth, just "a few rather vague ideas about the scope for supporting a number of predictable sectors". And the charges have been echoed across both the private sector and the House of Commons, particularly following shock figures showing the economic recovery slipping into reverse in December.

It is a theme that the EEF takes up in proposals for the 2011 Budget to be sent today to the Chancellor, George Osborne. "Last year's Emergency Budget was about sorting out the public finances, this one needs to be about generating stronger economic growth underpinned by investment, innovation and exports," Steve Radley, the EEF director of policy, said. "We are looking for a one-parliament project to dismantle the barriers to growth that have built up over the last two decades."

According to the EEF, there have been some positive developments since the Coalition Government took power last May, such as the four new export credit initiatives announced earlier this month, moves to push banks to boost lending, and the Growth Review launched by Mr Osborne and Business Secretary Vince Cable in November. But so far policy making has been piecemeal and lacks the coherent strategy needed to send a signal to manufacturers that Britain is a business-friendly environment, the organisation claims.

The EEF Budget submission focuses on four areas – tax, access to finance, skills issues and regulation – but says the Government's priorities should be investment and environmental taxes.

One key area is the capital allowances regime, which will be cut further in 2012, despite the fact that manufacturers upgrade equipment at a much faster rate than in the past. "After the cuts it will take 33 years to write off the investment against tax, while manufacturers tend to replace their equipment every seven or eight years," Mr Radley said.

Simplification of environmental taxes is also vital if Britain is to address looming competitiveness issues, says the EEF. The Government's commitment to a carbon price floor, plus the transformation of the Carbon Reduction Commitment into a tax in last autumn's Comprehensive Spending Review, added to the European emissions trading scheme and the Climate Change Levy, leave manufacturers facing four separate environmental taxes.

"Such a weight of tax cannot be sensible in terms of competitiveness," Mr Radley said. "Small companies are very mobile, and Britain needs a clear signal from government that it is creating an environment that will make them want to make investments here."