Budget should pave way for businesses to hire
- Joe White is chief operating officer at gandi.net. The opinions expressed are his own. He will participate in a in a Reuters Budget live blog at noon GMT on Wednesday, March 24, 2010. Please tune in and join the discussion.-
With the general election just around the corner, chances are that this will be a very safe budget from Chancellor Alistair Darling.
He will want to defer as many unpleasant decisions until after the election, look responsible, and emphasise that Labour is the safest pair of hands for the economy.
And he’s in a better than expected position to do this. The overall amount of borrowing for this year has been revised down several times, and it could be as low as 170 billion pounds by the time of the budget speech.
While this is still a massive figure, it’s better than it could have been and means that he can afford to reduce some of the UK’s national debt with the savings (look responsible), and spend on a few very targeted programmes designed to stimulate the economy (appeal to voters).
These programmes will likely focus on issues that everyone can agree on so that they appeal to people beyond the core Labour heartland.
One of the most worrying impacts of the recession has been the growth in long-term unemployment, and particularly amongst the youth. No one likes young people on the streets, and so methods to get them into work will be a priority.
While this is all good stuff, I’m concerned that we aren’t doing enough to stimulate the industries which can have a sustained, positive impact on the economy.
During the nineties and noughties, we spent a lot of time and effort building the financial services industry in the UK, and relying on it has proved to be a poor choice. By contrast, the technology industry will be one of the largest growth industries worldwide, and we need to do more to stimulate it in the UK.
There are no Microsofts, Googles, or Facebooks founded and headquartered in the UK, and they contribute an extraordinary amount to the economy. And outside of the internet space, some elements of green tech and biotech also have massive growth potential.
So how can we do this? There are already tax credits for companies doing R&D, even if they are loss-making businesses (which investment backed early stage businesses often are), and this is definitely a move in the right direction. However, I’d like to see more done to encourage employers to bring young people into the technology industry.
One of the easiest ways to do this is to provide subsidies on payroll tax so that SMEs and corporates within the high-tech sector can employ more people. This will have the dual benefit of giving employers more resource to build the business, and more people will become skilled in the high-tech sector.
One way or another, we need to find a new growth engine for the UK economy and how Darling addresses this problem will be the core emphasis of his speech.