Pre-Budget Report
7th Dec 2009
Here in the North East it will be down to business to stoke the flames of economic recovery. After a tough few years an end to the recession is finally in sight, but reversing the upward trend in unemployment and securing our economic future will be a dif
In the Pre Budget Report (PBR) the Chancellor faces some tough challenges, set against a backdrop of rising unemployment and dwindling tax receipts. The government is borrowing £500m a day and the money markets need to see a concrete plan for addressing our staggering budget deficit. At the same time it may be too early to take away some of those supportive measures introduced keep the economy moving.
The government's record is mixed at best, with the UK the last of the major Western economies to climb out of recession, lagging behind Germany, France and the United States. If the Chancellor gets it wrong there is a real risk of a "double dip" with negative growth returning in the New Year. Looking ahead we are likely to see tax rises, including plans for an increase in employer's national insurance contributions. This amounts to little more than a tax on jobs and job creation and is one measure most would be relieved to see the Chancellor abandon. At the same time many businesses will hope for the increase in VAT back to 17.5% (or even higher) to be delayed and for the car scrappage scheme to be extended.
Here in the North East we would benefit from increased support for green jobs, with the TeesValley well placed for Carbon Capture and Storage technology development and Tyneside using its engineering skills to manufacture wind turbines for offshore power generation.
There is a real risk in any pre election PBR that the government will be tempted by populist measures and eye catching giveaways. In these serious times we need the Chancellor to resist the urge to play politics and focus on our economic needs. Businesses in particular can ill afford additional costs we need to secure several quarters of economic growth before unemployment will start to fall. Much of the PBR will be about re-establishing confidence and showing we are on the right track, it will not be easy to get the balance right and the consequences of getting it wrong would be felt for many years to come.
Author: James Wharton, Solicitor (JamesW@bhplaw.co.uk)
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