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BUDGET REACTION: Chancellor recognises ‘need to place business at the heart’ says BCC

Posted: 24/03/10 by Northamptonshire Chamber

Responding to the Chancellor’s Budget today, David Frost, Director General of the British Chambers of Commerce (BCC), said: “After two years of economic downturn, the Chancellor has clearly recognised the need to place business at the heart of this Budget. Doubling the annual investment allowance, help with business rates, and allowing entrepreneurs to keep more of their gains will prove especially popular. The Chancellor could have done more to set out a clear plan for the reduction of the budget deficit, which continues to threaten business confidence and investment.”

Commenting on the macro-economic points in today’s Budget, David Kern, Chief Economist at the BCC, said: "The Chancellor’s GDP forecasts for 2010, though slightly stronger than our own, are realistic. But, the official forecasts envisaging very rapid growth in 2011 and beyond are much too optimistic.

"Since the Chancellor’s medium-term predictions for the public finances are based on growth expectations that many analysts would see as unrealistic, he may struggle to persuade the markets that his deficit-cutting plans are achievable without further measures.

"As envisaged in the BCC’s recent economic forecasts, borrowing in 2009-10 and 2010-11 is very likely to be lower than the Chancellor predicted in December’s Pre-Budget Report. But the Chancellor’s borrowing forecasts for subsequent years appear too optimistic and more detail will be needed to ensure that Britain’s AAA credit rating is secure. 

"The markets will also be disappointed that that some of the savings made from the lower than expected borrowing this financial year and next are being diverted to new spending plans, rather than actually cutting the deficit.

“The Chancellor will have to do more to persuade the markets that the health our public finances will be restored within a realistic timescale. The official deficit-cutting plans still lack sufficient credibility."

Commenting on the increase to the National Minimum Wage announced today, Dr Adam Marshall, Director of Policy and External Affairs at the British Chambers of Commerce (BCC), said: “The National Minimum Wage increase took some of the shine off a Budget that had small and medium-sized businesses at its heart.

“It is astounding that the Government would increase the minimum wage by 2.2% at a time when private sector wages are virtually flat, and companies across the country are still making tough choices to keep as many people in employment as possible. While the recession may be over, the jobs market will remain tough for some time to come.

“A near-doubling on last year’s increase is even more astounding. Combined with next year’s rise in employer National Insurance Contributions, a minimum wage that’s a ‘one-way bet’ could stop some businesses taking on new workers.”

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