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The Institute of Directors has welcomed George Osborne’s Autumn Statement as “a tricky job, well done”, as the Chancellor adopted several IoD proposals for the nation’s economic and public policy.

The IoD’s original submission to the Chancellor for the Autumn Statement can be found online here. Of the IoD’s proposals, those on infrastructure spending, Capital Allowances, Corporation Tax and shale gas were taken up in the Autumn Statement – added to which the Chancellor announced localised pay in schools, a long-standing IoD policy recommendation.

Below, IoD policy experts address a range of different areas covered in the Autumn Statement.

Economic Overview

Graeme Leach, Chief Economist at the Institute of Directors, said:

“This was a tricky job, well done by George Osborne. Faced with a weaker outlook for GDP growth, the Chancellor needed to raise business confidence whilst at the same time keeping the deficit on a downward path. And he largely succeeded, particularly with the surprise reduction in Corporation Tax. Ideally, we would have wished for further and faster deficit reduction but political reality always made this unlikely. Our key concern is that the OBR’s growth forecasts will yet again prove too optimistic, with the result that the deficit in the out years will be much higher than forecast. Business confidence will be boosted by the corporation tax cut.”

Corporation Tax

In response to the news of a further cut to Corporation Tax, Richard Baron, Head of Taxation at the IoD, said:

“The surprise reduction in Corporation Tax is a very welcome boost to the UK’s competitiveness at a critical time. The private sector is working hard to deliver jobs and growth, and the Chancellor has waded in to support that. Reducing the tax burden for all businesses is the most straightforward way to help them expand and take on more staff. We now need to put the UK out ahead of the competition, with additional cuts down towards 15 per cent in future years.”

Fuel Duty

Corin Taylor Senior Economic Adviser at the IoD, welcomed the cancellation of the planned fuel duty rise, saying:

“Fuel duty is a serious drag on the economy, so millions of businesses and consumers will be delighted with the news that the planned rise has been cancelled. A rise in fuel duty would have made it harder for people to get to work, deterred customers from going to the shops and increased the cost for businesses to receive raw materials and ship out their products. The Chancellor should be congratulated for making life easier for all of us to get on with the task of getting Britain growing again.”

Pensions and Savings

Malcolm Small, the IoD’s Senior Adviser on Pensions Policy, said:

“The Chancellor delivered mixed news for the future of pensions. Cutting tax reliefs will be yet more evidence for a suspicious public that the Treasury views pension savings as a cash cow. That is another blow to public confidence at a time when we should be encouraging people to put money aside. By contrast, increasing the drawdown rate and expanding the scale and range of tax exemptions for ISAs are both welcome steps. What we need is a coherent strategy for retirement saving – rather than giving with one hand and taking with the other.”

Shale Gas

Corin Taylor, Senior Economic Adviser at the IoD and co-author of the “Britain’s Shale Gas Potential” report published in September, said:

“George Osborne is absolutely right to open the door for UK shale gas. The US shale revolution has led to some of the lowest energy prices in the world, an industrial renaissance and a fall in carbon emissions. Britain’s economy and environment could benefit from a similar approach. Building new gas plants and developing the UK’s shale resources in a responsible way will be needed until renewable energy sources can be made more reliable and affordable. Shale gas can be extracted safely with proper controls and could supply a tenth of Britain’s gas needs for a century, cut imports and create 35,000 jobs. The quicker we get started, the better.”

Annual Investment Allowances

Welcoming the Chancellor’s move to encourage capital spending by business, Richard Baron, Head of Taxation at the IoD, said:

“In uncertain times, companies are sitting on their cash rather than investing. A temporary increase in the allowance for plant and machinery from £25,000 to £250,000 will encourage them to spend some of that money now, providing a quick economic boost.”

Infrastructure Spending

Corin Taylor, Senior Economic Adviser at the IoD, said:

“Re-allocating spending from government departments to vital infrastructure projects is just the kickstart the economy needs. Britain’s roads have been starved of investment for too long, and IoD members will look forward to fewer delays once the upgrades announced today have been completed.”

Localised School Pay

Graeme Leach, Chief Economist at the Institute of Directors, said:

“Allowing individual schools to set their teachers’ pay based on performance is the first step towards much-needed reform in the way public sector pay is controlled. It makes sense for headteachers rather than bureaucrats in Whitehall to set pay in schools, and the same should apply for managers in the NHS and the civil service. Public sector pay needs to be more much more responsive to local labour market conditions to enable the private sector to compete.”

Help for Small Businesses

Richard Baron, Head of Taxation at the IoD, said:

“The UK’s small firms will be pleased with the extension to their rate relief scheme. 350,000 businesses will now not pay any business rates until 2014, a very helpful move when budgets are tight. SME exporters will also be pleased that UKTI spending to promote exports is on the rise, helping them sell more across the world.”

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