Labour's business 'bitter pill' will make ambitions in Scotland harder to deliver
Rachel Reeves’ October 30 Budget does not leave these ambitions out of reach, but it will make them harder to deliver.
Given the UK’s well documented issues with economic growth – as well as its structural problems around productivity – we needed a Budget focused on decisive and visionary reform. A key starting point for this should be greater efficiency and a laser-focus on delivery in the public sector, restoring confidence that services will be delivered efficiently and effectively.
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Hide AdOf course, we recognise that it is vital to ensure key services such as the NHS are properly funded. But we ultimately need a public sector that enables rather than hinders economic growth, and it is unclear how this Budget will help deliver that.
Moreover, some of the tax rises affecting the private sector will have unintended consequences. The decision to increase employer National Insurance contributions, for example, will increase costs on businesses and could harm job creation, particularly for those businesses with tighter margins.
The decision to bring pension savings into the scope of inheritance tax is likely to impact confidence in the long-term savings industry, disincentivise savers, and would appear to have a disproportionate impact on private sector workers.
Investors, including the international investors the UK government is so keen to attract, value a stable fiscal and regulatory regime. The risk of this Budget is that it makes businesses less enthusiastic about investing in Britain, hitting our ability to drive the levels of growth the country desperately needs.
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Hide AdThis is not to suggest the Budget is all doom and gloom. A longer-term economic vision from government has been absent in recent years, and it is welcome to see ministers once again thinking in years and decades rather than weeks and months.
Funding for key measures such as GB Energy will help kickstart investment in green technology, while the development of a ten-year infrastructure strategy and the establishment of Skills England to help deliver a highly-trained workforce show welcome long-term thinking.
Looking ahead to the Scottish Government Budget in December, it is vital we see any additional public sector spending linked to reform and innovation.
With £3.4 billion of additional Barnett consequentials expected, ministers in Holyrood should use this additional headroom on initiatives that are most likely to stimulate economic growth, while targeting public sector efficiency, delivering value for taxpayers and businesses across Scotland.
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Hide AdWith interest rates coming down and steady economic growth figures for the coming years, there is still reason to be optimistic about the future of the UK economy. But, having delivered this bitter pill so early after its triumph at the general election, it is now vital the Labour government makes good on its promises to work with and not against business, including financial and professional services.
For that, ultimately, is the only way the government will deliver the economic growth the country so desperately needs.
- Sandy Begbie CBE is Chief Executive of Scottish Financial Enterprise
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