CBI gives Treasury a plan for growth

The regional director of the CBI will today warn the chancellor that reducing the deficit and revitalising growth strategy must go hand-in-hand

The UK's largest business lobbying organisation is urging George Osborne to stick to current deficit reduction plans in his autumn statement but consider specific measures to kick-start growth by unlocking private sector investment.

The CBI's proposals include bringing forward ten publicly-funded road projects forward within the existing spending programme and a number of other suggestions.

Continued uncertainty in the Eurozone, and the resulting weaker prospects for exports and investment have led to a marked drop in business and consumer confidence, and as a result the CBI has revised down its forecast for the UK economy. The UK's leading business group now expects GDP growth to be 0.9pc in 2011 and 1.2pc in 2012, down from 1.3pc and 2.2pc respectively.

Richard Tunnicliffe, CBI regional director, said: 'The Government must stick to its plans to bring down the deficit to maintain confidence in the UK's public finances and keep the cost of borrowing down, but now is the time to revitalise its growth strategy and create a 'plan A plus'. In uncertain economic times, confidence falters, investment grinds to a halt and job opportunities fade. This package of measures taken together could make a real difference to the economy, creating jobs and boosting growth in the years ahead.'


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The CBI is urging the Government to consider a range of measures to help kick-start growth which they say will come at little extra cost to the Exchequer.

Its proposals range from actions to boost investment in infrastructure, stimulate the housing market and improve the roads, to supporting energy intensive industries, reforming the electricity markets and tackling youth unemployment.

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THE CBI's PROPOSALS FOR PLAN A PLUS

On infrastructure, the CBI proposes:

Two road-tolling projects financed by the private sector – widening the A14 from Rugby to Felixstowe and improving the A1 in the North East.

Bringing ten publicly-funded road projects forward within the existing spending programme, to get shovels in the ground and ease congestion in transport networks. These include projects on the A11, M25, M1 and M60.

Re-instating a further 14 major road projects delayed in the 2010 spending review to fill the gap created in the pipeline from 2013, analysing whether or not private sector investment could be used. These include projects on the M1, M6 and A38. A full list is attached.

Making infrastructure investment decisions more attractive by taking actions which do not add to the public purse. These include simplifying the planning regime, standing firm on the National Planning Policy Framework to unblock local investment, and simplifying the process for major infrastructure projects.Providing clarity to encourage investment in energy infrastructure on Electricity Market Reform, the Renewables Obligation and National Grid projects.

The CBI proposes three further ways the Government can help boost growth in the near term, which taken together would cost no more than �500 million a year:

Preventing the exodus of the UK's energy-intensive industries by giving a rebate to users on the carbon floor price. Companies in sectors such as steel, aluminium and chemicals are vital to shifting to a low-carbon economy and are already being hit by rising energy prices and slower demand. The CBI proposes targeting companies most at risk with a rebate, at an estimated cost of �300 to �400 million in 2013, and �600 to �700 million in 2015.

Stimulating the housing market by underwriting mortgage indemnity guarantees, reducing the risk of higher loan-to-value mortgages to buyers and lenders. This would help rebuild the first time buyer market, with knock-ons for the whole housing market, and be provided on a risk-sharing basis by mortgage providers and house builders. There could be a role for the Government in providing tail risk guarantees.

Targeting measures on tackling youth unemployment, including a Young Britain Credit worth �1500 for firms taking on an unemployed person aged between 16 and 24 years, which would cover the first year's National Insurance for employers. This would cost �150 million a year, which is affordable within the context of the Government's deficit reduction plans. Freezing youth rates of the National Minimum Wage would also prevent the young and inexperienced from being priced out of the labour market.

Further measures to support growth should also be considered as 'next-in-line' priorities as soon as the public finances allow. These include:

Introducing capital allowances for infrastructure investment. This would cover the 28% of private sector infrastructure investments not eligible for tax relief under the current regime. This would apply to future spending to avoid deadweight cost and ensure only new infrastructure is incentivised. This would cost an average of �200 million per year if assets are depreciated over 25 years (4% rate), or an average of �130 million per year if over 40 years (2.5% rate).

Improving access to finance for small and medium-sized enterprises (SMEs), with a mid-cap bond market as part of the Chancellor's credit-easing plans, to try to increase the flow of credit to medium-sized businesses

Enhancing the climate for investment in research & development (R&D), by extending the R&D tax credit to all non-profitable companies, and allowing them to factor the credit into R&D investment independent of their position in the business life cycle. This would cost around �200 million a year. Widening the definition of the scheme to include design would promote innovation and cost around �40 million a year.

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