Andrew Palmer: Simple shift of focus could get economy back to growth

That’s why the CBI is urging the Chancellor to shift £2.2bn of spending to high-growth areas – £1.25bn on getting Britain building and £950m on ensuring our tax system can help businesses create growth.

Housebuilding has the potential to give an immediate boost to the economy, but the industry is struggling. Despite a fall in house prices in most parts of the country, young people still struggle to get on their first steps on the market. In 2010, there were fewer houses built than in any year since the Second World War.

Meanwhile, the construction sector has suffered more than most from the difficult conditions of the last few years. Figures for November 2012 to January 2013 show construction output down by 10 per cent compared to the previous year and the industry’s poor performance is widely cited as a major reason for the UK’s return to recession.

The Budget can help stimulate both supply of and demand for new housing. On the supply side, investing in 50,000 new affordable homes and introducing new incentives for refurbishing empty houses could see an immediate return – for every £1 invested in construction, £2.84 is generated in the wider economy, and the CBI estimates that this initiative would create 75,000 new jobs.

Government also needs to free up the private sector to match this investment in housing, ensuring land is released quickly for construction and the planning system is not allowed to become a block on economic growth.

An extension of the housing guarantee scheme and a tax cut or subsidy for refurbishment work to existing housing stock are just two measures that could very quickly give a boost to Britain’s builders.

On the demand side, there is evidence that the Government’s Funding for Lending scheme is already having a positive effect and, while still a tough market for the first time buyer, mortgage rates are lower than they were a few years ago.

But more could be done to give a boost to the market, for example extending the NewBuy scheme to second-time buyers struggling to get on the next rung of the property ladder or trapped in negative equity.

A recent Rightmove survey found that the average age for a second home purchase is now 41, despite 40 per cent of families saying their first home is too small for their family.

Looking only slightly further ahead, speeding up the delivery of many already-announced road improvements will create jobs and send a message to businesses, large and small, that the government is on their side. Proposed improvements to the A63 to Selby, for example, were announced last year in the National Infrastructure Plan but, as is too often the case, we are yet to see spades in the ground.

Relatively minor tweaks to the UK’s corporate tax system could also make a significant difference to prospects for growth. Freezing Air Passenger Duty, for instance, would immediately improve the ability of the likes of Leeds-Bradford International Airport to attract business and leisure travellers to our region.

Meanwhile, business rates – which hit small and medium-sized employers hardest – could be capped at two per cent, giving potentially high-growth businesses room to breathe and extra cash to invest in growth.

None of these measures mean increasing borrowing or plunging Britain into another public spending crisis. All that is needed is a simple shift in focus and a sense of urgency. Given the right tools, Yorkshire and the Humber’s businesses are ready, willing and able to create jobs and growth right now.