Switch tax burden to help business to grow, urges leading economist

Dennis Turner, of HSBC, predicted that present rates of growth will lead to continued business failures, rising unemployment and squeezed profits and urged the Government to switch the tax burden from business to the personal sector.

He said: "If you want to repay debt, there are three ways of doing it. It's the same as your mortgage.

"You can throw your keys at the lender, which we don't do. You could hope that the cost of the borrowing comes down. It won't.

"Or you earn more money and if you have a tax policy that encourages growth, you take that growth dividend not to reduce taxes, not to build more schools and hospitals but to repay debt."

He added: "Since 1945, the fastest decade of growth has been the 1950s.

"In the 1950s, our debt-to-income ratio as a country was 200 per cent. The worst scenario today says 75 per cent – what are we getting hung up about?

Speaking at an HSBC event for business leaders in Sheffield, he described the forthcoming budget on June 22 as a watershed moment in which the future shape and size of public services would be determined.

Mr Turner said: "We can only have the size of the public sector that the private sector can afford.

"The private sector has to spell out to the public sector, 'this is what we think government should do, these are things that might be better done by the private sector'.

"The Conservatives wasted a long time in opposition not asking these questions.

"The business of government is going to get in the way at the point where they are now starting to ask them."

Despite the widely-held view that manufacturing has been in decline for many years, he said Britain's output reached a historical high in 2006.

The UK, with low interest rates and a competitive currency, is well positioned to take advantage of global growth and better placed than most of Europe, added Mr Turner.

Regarding interest rates, he said: "Nothing will happen this year. They will not tighten monetary policy when they are busy cutting spending. It would be counter-productive. Interest rates will stay where they are, with a very slow increase next year."

Mr Turner took part in a question time debate, which also featured Gordon Bridge, the chairman of Rotherham-based manufacturer AES Seal, and representatives from HSBC and the Yorkshire Post.

Mr Bridge, a former Master Cutler, said the Government should help manufacturers by introducing 100 per cent capital allowances for investment and scrapping any plans to increase capital gains tax to 40-50 per cent.

He told the audience: "The last two years have been difficult but quite a few manufacturers have done well.

"They have done the right things, they have generated cash, they have eliminated waste, they have pursued excellence, they have pursued customer service and exports.

"Those companies that have done well have got better businesses today than they had two years ago and are well placed for the future."

As an exporter who issues invoices in dollars and euros, he said he is delighted with the currency rates.

The hi-tech, oil and aerospace sectors are performing well, he added.

His firm, AES, is 20 per cent up in the last three months compared to the same three months last year, he said.

He warned that South Yorkshire's manufacturing and engineering employers face a shortage of skills and said state funding for apprenticeship schemes had been largely gobbled up by quangos.

John Humphreys, the Today programme presenter, chaired the debate.

In a show of hands, the vast majority of the audience of 120 businessmen and women indicated they were optimistic about their business prospects.

The tasks facing Chancellor

GEORGE Osborne does not have to change the world overnight in his forthcoming budget, but he does have to set out a credible strategy to take the UK to a healthier place in five years' time, according to the director general of the CBI.

As June 22 looms, Richard Lambert said the Chancellor of the Exchequer must ensure that he provides enough information for businesses and bond markets to believe the nation is on the right track.

In an interview with the Yorkshire Post, Mr Lambert said private sector growth is vital in helping to bring public finances under control.

"If the economy is growing and firms are investing and employing more people and more people are paying tax and there's a mood of confidence out there, then that will make the job of cutting the deficit very much easier."

He added: "Business investment is going to be very important and we at the CBI make the argument that it's up to government to set a framework that makes the UK an attractive place for people to want to invest and build new facilities and hire more people."

Restored economic stability, including a predictable tax and interest rate environment, an improved education system, a healthy banking sector and secure energy supply will all make the UK more attractive to investors, he said.

Mr Lambert described the mood among his members as "modestly upbeat", with some improvements in business activity, construction and manufacturing but credit conditions remain difficult, particularly for small and medium-sized businesses.

Exports are picking up as well, but difficulties facing the eurozone pose a risk to the UK's economic recovery, he warned.

Mr Lambert was speaking ahead of a speech at Sheffield University on Tuesday evening. Yesterday he visited businesses in Leeds.