Budget 'could be defining moment in economic recovery'

THE Government's first Budget received a mixed response from industry, with some business leaders hoping it will be a "defining moment" in Britain's economic recovery, but other experts voicing reservations.

Budget at a glance

Hear informed debate in a special edition of our BusinessTalk podcast, with experts from Deloitte in Leeds

David Frost, director general of the British Chambers of Commerce said: "The government's decisive moves to cut the deficit will have positive effects on business and investor confidence. Even more importantly, the Chancellor's message that Britain is open for business will be welcomed by companies the length and breadth of the country, and across the globe."

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David Kern, the group's chief economist, said: "The budget could be a defining moment in Britain's economic history. If successful, the Chancellor's plan could put the UK on the path toward a sustainable recovery."

Richard Lambert, director general of the CBI, said: "The Chancellor has achieved his twin objectives of setting out a credible plan for the public finances and producing a convincing growth strategy for the longer-term.

"There was clear recognition of the role that business needs to play in getting the economy back into shape, and generating the jobs and wealth needed to sustain economic recovery.

"This budget is the UK's first important step on the long journey back to economic health. The autumn spending review, and the re-engineering of public services, will be equally challenging."

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Ian Brinkley, associate director at The Work Foundation said: "The regional announcements on capital projects and the Regional Growth Fund are very welcome, though we have reservations about the regional National Insurance cuts. Such schemes often have high deadweight and displacement costs. It would have been far more effective and less wasteful to spend the money targeting high-growth firms in the regions."

Terry Scuoler, chief executive of the Engineering Employers Federation said: "Today's budget may have given manufacturers much-needed clarity on how the government will go about reducing the deficit, but the short-term pressure to start tackling the deficit means the Chancellor has only done part of the job of rebalancing the economy.

"While businesses will welcome long-term reform and predictability of Corporation Tax and have been spared the worst impact of changes to Capital Gains Tax, predictability has come at the cost of competitiveness."

Institute of Directors director general Miles Templeman said: "The economy needed faster and deeper deficit reduction and that's exactly what the Chancellor has delivered. Equally important to the scale of deficit reduction is the way it is done.

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"The Chancellor has chosen the right route, by concentrating overwhelmingly on closing the fiscal gap by lower spending instead of higher taxation. We do not believe the budget will threaten economic recovery. Quite the contrary, it is likely to improve the economic outlook by showing the public finances are finally being brought under control."

David Hillman, of the Robin Hood Tax campaign, said: "The Chancellor called today's budget unavoidable - but it's the banks that have avoided paying the price of the global recession they helped create. Instead, the poorest have picked up the bill."

Dr John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development, said: "The Chancellor has introduced what must surely rank as the most astonishing UK budget statement in modern times. Mr Osborne's combination of 32 billion additional spending cuts by 2014-15 and an 8 billion net tax hike amounts to an unprecedented fiscal squeeze, including an extremely severe clampdown on the welfare bill.

"Yet both he and the independent Office for Budget Responsibility (OBR) reckon there is a greater than evens chance that the government will meet what the Chancellor calls its fiscal mandate with barely any serious short-term impact on economic growth and employment."

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John Walker, chairman of the Federation of Small Businesses, said: "The measures will go a long way to reducing the deficit and will please the 93% of FSB members who called for a clear plan on tackling the country's debt.

"The increase in VAT will however, hurt small firms who will have to pass the increase on to their customers, unlike big business which can absorb the cost."

Kevin Green, chief executive of the Recruitment and Employment Confederation said: "We are delighted that the government has put tackling business taxation at the heart of this budget. It is clear that the private sector will need to grow jobs as the public sector sheds them, and this budget sets the framework for this to happen."

British Retail Consortium director general Stephen Robertson said: "We didn't want a VAT increase. It'll hit jobs, consumer spending, the pace of recovery and add to inflation. But we accept the Government has no easy options. It's some consolation that the range of VATable products isn't being extended."