More grief for the dodgy Chancellor as chickens come home to roost............
Business blames Brown as economy slows down
The Business
By : Allister Heath November 27, 2005
BRITAIN'S top business leaders have rounded on Chancellor Gordon Brown this weekend, accusing him of failures on tax, pensions, energy policy, productivity and public spending. The onslaught, ahead of this week's pensions review and next week's Pre-Budget Report, confirms that the government's relationship with the business community is at an all-time low.
Fresh attacks from the Confederation of British Industry (CBI), the Engineering Employers' Federation, the Institute of Directors and other leading institutions come as a devastating report from Bridgewell Securities claims productivity growth has gone into reverse in Great Britain. Output per hour worked, a key measure of the success of the economy, fell by 0.3% in the third quarter, according to calculations based on official figures by Bridgewell's chief economist, Richard Jeffrey.
Over the past year, output per hour is up just 0.1% and output per person up by 0.4%, a performance Jeffrey describes as "truly horrible".
He added: "A partial explanation can be found in the shocking performance of the public sector. In the first half of this year, general government productivity [per person] was a mere 0.1% higher than in the first six months of 2004. The implication is that private sector productivity grew by 0.6% over the period."
In an aside in a speech at the Institute of Directors last week which has gone unreported in the national media, Brown was forced to acknowledge that the burden of red tape - which has increased hugely during his eight-year tenure at the Treasury - had become "ridiculous".
Brown admitted: "It has reached the ridiculous state of affairs that a national chain of shops or businesses operating in hundreds of different places and doing so under the same national company rules and regulations, can be subject to hundreds of different regulators and inspectors requiring information." The Chancellor was responding to a highly critical speech by the director general of the IoD, Miles Templeman.
Brown has also come under fire from the Engineering Employers' Federation. It warns that "over recent years, increases in taxation and the regulatory burden has diminished the ability of manufacturers to cope with today's rising costs". During the same time, companies in the US, most large European Union (EU) countries and its new members have seen their tax burdens fall, it added. "There is now concern that creeping reliance on new tax avoidance measures is raising the tax burden through the back door," the Federation said.
Sir Digby Jones, the CBI's director-general, described the growing fury of his members in a wide-ranging interview with The Business ahead of its conference on Monday. Jones, who has led the CBI for the past six years, said: "I've never heard such a feeling of annoyance and discontent from business towards the government."
Business believes the government has failed to tackle the big issues where leadership is required and to tackle vested interest groups, Jones said. "There is enormous anger at the craven surrender on pensions. It is easy to negotiate when you say: 'I give in.' The government has given in to its trade union paymasters," he said, referring to the government's failure to push through radical reforms to public sector pensions and to raise the retirement age for existing state workers.
On energy policy, he said: "The French are cheating [on a deal to provide gas] and North Sea oil is running out. It is almost amazing that it's five to midnight and the government is running around trying to sort things out. A debate should be opened on nuclear power."
Jones also warned that business is becoming progressively "disenchanted" with the EU. CBI members "are beginning to say: what's the value added of the EU?", Jones said. He added that the CBI would not accept giving up Britain's budget rebate unless a deal was struck which guaranteed that agricultural subsidies were slashed at the same time.
The "pendulum in the EU has swung towards trade unions and environmentalists", he said, expressing his frustration at the EU's "inability to be competitive" and failure to liberalise services, energy and move away from its "fortress Europe" mindset. "I'm hearing from a lot of companies about the amazing inquisitiveness of the Inland Revenue," Jones said. He argued that many believe it is "a hidden way or raising revenues" and "extremely onerous". Jones also warned of the "need to be on watch for stealth taxes".
He said that 2006-07 must see the peak for tax and spending as a share of the UK economy and that this ratio should subsequently fall. "The country can't afford it otherwise," Jones warned.
The concern at Brown's anti-avoidance clampdown was this weekend echoed by KPMG, the professional services giant, who warned it "could lead to a reduction in UK competitiveness". Malcolm Edge, chairman of KPMG's UK tax practice, said: "Businesses based in the UK could conclude that the UK is becoming a less competitive place to be located as they are increasingly required to structure their tax affairs in a manner that brings in the most revenue for the Chancellor rather than in the most effective way for them."