Graham Robb's latest Journal column - 09.12.14
The economy is once again in its rightful place at the front and centre of national debate. Even better, last week’s group of announcements from the Chancellor were Northern focused; our major North South road, the A1, is to receive substantial upgrading throughout Northumberland and an innovative and bold ‘Northern Sovereign Wealth Fund’ is to be created together with an independent shale exploration fund. Given the plethora of projects that a sovereign wealth fund could support and the potential of shale gas to the Teesside process industry, these are all most welcome developments.
I was amused by the comment from Nick Brown MP, that the Chancellor cares more about Mars than the North East; it was an old fashioned political trick of juxtapositioning one budget against another but it doesn’t stand up to scrutiny. The A1 upgrade alone will cost the taxpayer a quarter of a billion pounds.
Even though they were not exclusive to the North East, there were other measures in the Autumn Statement that benefit our economy. These include increasing the tax free allowance to basic and higher rate taxpayers; anything that gives the record numbers of people in work in this region more money to spend will help our economy. The Institute of Directors (IoD) thinks all parties should go further though. We want a triple locking of the tax bands to the higher rate of inflation (RPI), earnings or 2.5% on a similar basis to the single-tier pension.
The announcements of further support for SME lending through the British Business Bank and the Funding for Lending scheme are very welcome as was the expansion of the UKTI’s regional International Trade Advisers network.
All of these things demonstrate that the recent success of the economy is due to a targeted multi-faceted approach to enabling, but not necessarily subsidizing, businesses to become established and to grow.
The Entrepreneurs’ Forum and the IoD understand this. Members of both organisations form a cohort of business cheerleaders who back the risk takers, nurture the wealth creators and mentor those individuals who want to create opportunities and jobs in the North East.
Partly as a result of the optimism and hard work of the region’s entrepreneurs one set of data released recently was extremely positive. It didn’t get the attention it deserved so here it is in my column: The North East is now the top region in England for the growth of new businesses. That’s right we’re No.1 in England! Positive, unassailable, undiluted good news! The region has over 150,000 businesses for the first time. Its business population grew by 12% last year. It is still below the national average but it is catching up. We used to have 633 businesses per 10,000 of population now the number is well over 700 per 10,000.
Despite this cause for celebration, nobody should forget the truth about the public spending deficit – it is too high and has come down more slowly than planned. But it is projects that help business that do most to secure long-term deficit reduction.
When Chancellors stand up and announce measures to help businesses, most people glaze over and tune out. Some even think that businesses get too much attention. But private business really is the only source of taxation the Chancellor has. If private business isn’t trading, making profits and employing people there is no way of generating the tax revenues for public services.
In the North East the need for more businesses of all sizes is, in my view, the number one issue. Anything that makes business easier will help strengthen our economy further. Business wants and demands better transport links. Improvements to our road connections are underway but rail is critical too. Improvements to Darlington station will free up log jams on the East Coast line enabling more trains to run at more convenient times, Network Rail needs to prioritise them. Electrification from Middlesbrough to Northallerton is also a pressing issue. George Osborne didn’t stop massive capital expenditure in his first few years – hence the road works we all face frequently – and any future chancellor must resist the temptation to do so.
The percentage of public spending in the economy is set to fall to 35% - about the same as Australia but significantly less than Labour’s term in office. The task of the Government is to spend its reducing resources on projects that generate wealth and ensure businesses can keep a ready supply of taxable profits. Generate it, tax it, and spend it – in that order. The economy will be unforgiving on a political leader that plans to do the reverse.
North East Chairman of the Institute of Directors
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