UK manufacturers call for £30 billion boost

The proposals, put forward by the manufacturers’ organisation EEF, say the Chancellor should provide the fiscal stimulus in his pre-budget report with: · £5bn for infrastructure spending and small business loans · a 2p cut in small company tax · a 3p cut in the headline corporation tax · an increase in the annual investment allowance to £500K and first year capital allowances of 50% · a 2p cut in VAT and · a 2p cut in the starting rate of income tax In total, the suggested measures would cost £28.8 billion. EEF chief economist Steve Radley, said: “The daily drip of bad news on the economy is feeding deep anxiety that the recession could turn into rout. The poisonous mix of bad debts and the rising risk of deflation threaten the economy with a prolonged and painful downturn. Whilst interest rate cuts will help, their effectiveness will be blunted and the Bank of England is rapidly running out of ammunition. “Given the speed with which the air is being sucked out of the economy, government needs to weigh in and pull all the policy levers it can. Temporary, timely and targeted measures aimed at helping increasingly cash-strapped households and businesses should be at the heart of any such proposals. With the right mix of tax cuts and public spending, government can restore confidence, boost consumer spending and sustain business cashflow.” EEF said the temporary increases in public spending should involve government bringing forward investment in education, health care and the transport infrastructure projects that were vital building blocks for long-term sustainable growth. In addition, this would include targeted business support programmes, similar to the £4 million small business loan package announced in the West Midlands. Backed by tax cuts, more loans and insurance coverage for supply chains would ease the cash-flow problems faced by small business. However, EEF added that it was only prepared to give its backing for such a stimulus on the basis that it was temporary so as not undermine the long-term health of the public finances. Radley concluded: “However bleak the economic outlook, there is an equally urgent need to restore long-term confidence in the public finances. Any giveway now must be accompanied by reforms to bring borrowing down to sustainable levels if we are not to face a long period of austerity.”