Partner Article

Budget countdown: Business leaders urge caution

A BUSINESS group whose members collectively employ a third of the total North East workforce has urged the Government to introduce a jobs test ahead of any public sector cuts in the region.

The North East Chamber of Commerce (NECC), which has more than 4,000 members, has counselled that cuts to public services must be undertaken with the full understanding of the impact this will have on the private sector.

NECC cites the “untypically large role of the public sector” in the region as a pressing need for what it has called an ‘employment recovery test’.

With 32% of the region’s employees working in the public sector – compared to 27% nationally – the potential heavy impact on the region’s labour market is clear.

A secondary effect could be felt due to the extra role of public spending in the economy and the number of private sector firms who rely in part on public sector customers.

Local authorities in the North East alone are predicting cuts of more than £800m to capital spending over the next three years, potentially affecting 17,000 construction sector jobs.

James Ramsbotham, NECC chief executive, said: “Public spending cuts must be carefully assessed to avoid a knock-on impact on businesses that supply the public sector. The region is relying on companies to create jobs in the future and the Government mustn’t make it harder for them to do so.”

Meanwhile, Graham Smith, managing director of Banks Developments part of the County Durham-based mining, property and renewable energy firm The Banks Group, yesterday said he was greatly concerned by planned government cuts.

He said: “Significant reductions in these departments’ capacity to process planning submissions will in turn lead to delays in the approval and eventual construction of the projects that developers are putting forward. If such new schemes are held back, it is likely to have a tangible negative impact on the speed of the wider economic recovery and the associated creation of much-needed new jobs in the construction sector.

“We also feel it is crucial for the Government to continue to invest in ongoing affordable housing programmes. These are essential if targets for the provision of new homes are to be hit in areas that both urgently need them now and will do so in the future, and these schemes clearly also have a significant employment dimension to them as well.

“As an employer, we firmly believe that any tax increases should be focused upon discretionary areas of spending, through VAT, rather than on National Insurance which create further taxes on employment.

Barrie Hensby, chief executive at regional fund management firm NEL Fund Managers, warned the chancellor against any measures that would hinder the private sector’s role in the recovery.

“Any changes to the Capital Gains Tax framework need to be shaped in such a way as to not greatly reduce or remove the incentive for entrepreneurs to build businesses that they might eventually look to sell,” he said.

“Private sector firms also need ready access to investment capital if they are to put growth and development plans into action, and hence create new jobs, and at a time when access to bank credit is still very much restricted, companies need to have readily available alternatives to which they can turn.

“There are a number of investment initiatives in existence which have been proven to be a cost effective way of generating both new jobs and sales, but with the Government looking at all areas for potential cost savings, it has been mooted that these might be rolled back or removed altogether, which we believe would be a very damaging short-term move for the economy’s long-term health.

“The demand for investment from the £125m Finance for Business North East Fund in our area is clear proof of the ambition and ideas of British firms, and whilst we know these regional funds are safe, we would very much hope that other similar initiatives across the UK that are in earlier stages of development are left in place.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .