THE Chancellor is right to continue the path towards balancing the government’s books and beginning to pay down the ballooning national debt, which is expected to swell by a further £290 billion over the next three years.
Indeed, one of the striking aspects about the Budget is that despite the scale of the public spending restraint that is required to eliminate the fiscal deficit, government debt as a share of our economy is still set to be higher in five year’s time than now.
Without doubt, this focus on bringing the public finances back under control must go hand-in-hand with promoting a new economic model based on trade and business investment, rather than the debt-propelled consumer and government spending of the recent past.
In that respect, the Budget contained a number of solid growth-enhancing measures, notably the shift of monies from current to big ticket capital expenditure. Several important tax reductions were announced too which will make it less costly for small firms to hire staff, and easier for all businesses to access finance. The further planned reduction in corporation tax to 20 per cent is significant and encouraging, especially as retained profits will play a bigger role in financing firms’ investment plans given the constraints on traditional lending. It will also make Britain one of the most internationally competitive locations to do business.
That said, one of the few economic bright-spots over recent years has been the export success of Scotch whisky, and the rise in duty will hold back one of the main sectors actually delivering on that challenge. The Chancellor should be encouraging the industry to further success, not penalising it in this way.
The devolved Scottish administration is set to receive some windfall “consequentials”, and it is important that these are directed towards GDP-enhancing investments.
The Chancellor appears to have achieved his twin objectives of producing a convincing narrative for growth, while maintaining a credible plan to get the public finances under control. However, this Budget is in many respects is a down payment, with further tough decisions ahead.
• Iain McMillan is director, CBI Scotland