Written evidence submitted by the Federation
of Small Businesses
The FSB has been calling for a plan to bring
public finances back to order, and the CSR has now drawn a clear
map for the restructuring of the Government expenditure. Over
70% of FSB members said that they want to see a reduction in state
expenditure, while 60% say that they want to see cuts even if
it would impact on their business.
Without action on the deficit, the UK economy
would have lurched back to the situation where credit rating agencies
and even the Bank of England were concerned about British borrowing.
Furthermore, interest rates and the cost of Government borrowing
would have increased and placed huge pressures on economic growth.
The FSB, additionally, called on the Government
to produce a Programme for Growth to outline key policies to promote
and incentivise growth. We will continue to call on HMT to produce
a Programme for Growth before the Autumn Statement in November
2010.
While the Chancellor did not explore the theme
of the competitive economy at the dispatch box, the full "book"
shows a little more detail.
INFRASTRUCTURE AND
ENVIRONMENTAL SUSTAINABILITY
The Government has prioritised capital spending
as a key method to achieving growth. Roads, trains and ports will
all see investment, and the Government argues that these projects
will not only provide short term jobs through the building process,
but produce long lasting growth. The Government states that transport
capital investment in real terms will be higher in 2014-15 than
in 2005-06. (A regional capital investment chart is attached for
further information).
£530 million will be spent on superfast
broadband to incentivise the roll out of broadband to all regions
in the UK. £300 million will come from the BBC, through the
license fee. Pilot schemes will be carried out in the Highlands
and Islands, North Yorkshire and Cumbria and Herefordshire.
Turning to the green and low carbon economy,
the FSB believes that the Government has moved in the right direction.
The Chancellor announced £1 billion for a Green Investment
Bank from existing money and projected asset sales. However, this
investment is insufficient. The growth of the low carbon economy
offers us the chance to realise a true green recovery and a mere
£1 billion of funding will not be enough to generate sufficient
low carbon private sector investment. We also believe there is
an urgent need to clarify exactly what the remit of the Green
Investment Bank will be.
The Renewable Heat Incentive (RHI) will be introduced
with £860 million of funding. The FSB has been lobbying for
some time for the introduction of an RHI. Heat is the single biggest
use of energy in the UK and accounts for around 60% of an average
household's energy bill. Heat pumps, solar hot water panels and
biomass boilers offer small businesses the means to slash their
dependence of fossil fuel generated heat as well as their energy
bills. We therefore welcome the £860 million announced in
the CSR to kick start the RHI.
We are also grateful that the current Feed-In-Tariff
(FITs) levels have been protected. Small scale renewable technologies
have the potential to allow small businesses to cut their energy
costs and play their part in reducing CO2 emissions. Whilst we
are grateful that the current FIT levels have been maintained
they may be subject to review earlier than planned and we believe
any downward revision of the levels could have a significantly
negative impact on the take up of small scale mircro-renewables.
We also note that the Carbon Trust is being
reviewed which we believe plays a valuable role in supporting
SME low carbon start-ups and helping small businesses go green
by administering the 0% interest loan scheme. We believe it is
essential that funding for the 0% interest energy efficiency loan
scheme is maintained.
EMPLOYMENT RELATED
ISSUES
The Government will raise the State Pension
Age for men and women to 66 by April 2020. Today older workers
play a vital role in the UK workforce. Life expectancy at birth
in the UK has reached its highest level on record for both males
and females and the significant savings from raising the State
Pension Age means delaying retirement make economic sense.
The Government has confirmed funding for the
introduction of the auto enrolment pension scheme from 2012 and
the establishment of the National Employment Savings Trust (NEST),
to help individuals save for their retirement and encourage high
quality pension provision by employers. We are currently concerned
about how well this scheme will be managed and its suitability
as a default scheme.
Whilst the Government envisages that NEST will
be inexpensive, it may not be for those who join in its first
few years due to set-up costs. NEST borrowed around £600
million from the Government to start up and will charge a 2% levy
on all contributions until the costs are recovered. The charge
should only apply in the short-term and will disappear once the
setting-up costs have been recovered. But at this stage it is
not clear how long that might take and how quickly the Government
wants its loan to be repaid. Secondly, NEST's annual charge is
also expected to be higher than the 0.3% announced and it may
also try to rapidly recoup costs in its transactional fees.
We welcome the announcement on the Universal
Credit and commitments to generate employment. However, in the
current climate Government must provide incentives for small businesses
to create the new jobs for people to move from benefits into work
and to help people become self-employed. Additionally, we welcome
the commitment to the Jobcentre Plus and hope that this includes
the maintenance and roll-out of the Small Business Recruitment
Service (SBRS).
LOCALISM AGENDA
The FSB welcomes the commitment to keeping the
Post Office network alive and to announcing further investment.
We believe that a Post Bank, as campaigned for by the FSB, would
keep the network alive and reduce the network's dependency on
state funding.
The Regional Growth Fund (RGF) has been extended
by £400 million for a third year. It was expected that the
RGF would last for two years with a funding envelope of £1
billion. The fund is designed to help rebalance the economy, and
promote private enterprise in areas where the public sector will
be scaled back.
The announcement of 15 hours of free nursery
entitlement for those within disadvantaged backgrounds is a socially
acceptable policy; however, small private, voluntary and independent
providers of day nursery care are currently struggling to provide
the free entitlement. Government must work with local authorities
to find a workable solution so that nurseries do not shut down
in high numbers.
SKILLS AGENDA
The FSB welcomes the announcement of £250
million extra funding for adult apprenticeships. However, we are
concerned by the statement in the departmental settlement document
"exploring mechanisms to increase employer contributions
such as voluntary training levies". We want to encourage
small businesses to invest further in training; therefore Government
must do more to engage the small business community in training
as opposed to the training levy approach.
The Government will continue to support basic
skills provision in order to ensure individuals are given the
chance to gain basic numeracy and literacy skills. This is an
admirable policy and small businesses need these skills, however,
employers should not have to pick up the tab for a failure in
the education system.
CONCLUDING PICTURE
The FSB welcomes a clear road map to deficit
reduction being put in place. However, we are concerned that not
enough emphasis was placed on economic growth and urge the Chancellor
to use the Autumn Statement to produce a clear vision for private
sector enlargement.
A Programme for Growth, as called for by the
FSB, is even more important given that latest FSB research shows
that 10.4% of firms expect to reduce employment over the next
three months as business confidence in future prospects and revenue
growth weakened over the July to September period. A Programme
for Growth aimed at small firms is required given that more than
80% of jobs in the EU were generated by small businesses between
2002 and 2007.
The FSB stresses the importance of using targeted
spending (through capital and fiscal measures) to bring growth
and help reduce unemployment in its submission to the CSR. With
the Office of Budget Responsibility stating that 490,000 public
sector jobs will be lost during the CSR period, it is vital that
the private sector is incentivised to fill the void. The FSB recommends:
— Extending the National Insurance Contributions
holiday to existing firms: providing incentives for businesses
with zero to four members of staff when they employ up to three
more people. (The £1billion Regional Growth Fund could be
scrapped to pay for this).
— Cutting VAT for the construction sector
to 5% will not only help create jobs and stimulate this sector
but, as evidence shows from other countries, increase Treasury
revenues from this sector.
Although, the Chancellor stated that a key theme
for the CSR was to build a competitive economy which will underpin
the rebalancing of the economy, it is disappointing that the above
policies were not announced by the Chancellor.
November 2010
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