Budget was ‘really tough on business’, says CBI chief

We spoke to Rain Newton-Smith, the chief executive of the Confederation of British Industry (CBI).

Krishnan Guru-Murthy: It’s hard not to see this as a sort of ‘business huffing and puffing’ because the chancellor had already said this was a one-off reset. And then your message today has been, ‘well, don’t do this again’. She said, ‘well, okay’. What was that all about?

Rain Newton-Smith: I think what’s really important to say is – for the business leaders I’ve been speaking to – the budget was really tough on business and the decisions they are having to make because we are seeing higher contributions from national insurance, means that it’s harder for them to invest. It’s harder for them to create the jobs they want to create in our local communities. So whether you’re a theatre and you’re not making a profit this year – and already this is going to take more out of your bottom line next year, they want to be growing, but it’s really difficult. And if you’re a further education college and you want to be providing courses that help people back into work, you are also facing this cost. So I think we need to acknowledge the challenges businesses are facing and we need to make sure that we make it easier for them to invest and grow going forward.

Krishnan Guru-Murthy: But what do they expect? You know, when you are all sitting down for these smoked salmon breakfasts, did it not occur to any of you that taxes might have to go up?

Rain Newton-Smith: I think businesses acknowledge we need to fund our public services. Everyone really sees the pressure on the NHS and the need to get funding to deliver to our frontline services. But over the long term, the only way we can fund those public services is by encouraging investment and growth in the UK economy. And I think as you heard there from Keith Anderson, there are so many business leaders who are really defiant about the UK’s capability. We have world leading universities, we’ve got creative industries, we’ve got manufacturers, we’ve got…

Krishnan Guru-Murthy: So what do you want them to do?

Rain Newton-Smith: So we want them to have this conversation about how do we really drive growth and investment in the UK..

Krishnan Guru-Murthy: What’s the answer to that? What do you want from government?

Rain Newton-Smith: Well, I think in the immediate, we need to take off some of the pressure on businesses’ bottom line. So the chancellor is committed to reforming business rates. We really need to make sure that that works for retail and hospitality, but also makes it easier for our manufacturers, our aviation sector, to invest and choose to invest in the UK economy. And we also need to think about the growth in skills levy. The government has committed to doing that. Let’s bring that flexibility into how the apprenticeship levy funds are used now, so that businesses can invest in the training that our workforce needs. And we need to double down on our capability and set out that blueprint for how the UK is competitive on a global stage.

Krishnan Guru-Murthy: And how important are these supply side reforms and planning and all of that. Will that deliver the growth you want?

Rain Newton-Smith: So I think absolutely ensuring that planning decisions are made more quickly, that is one of the things that’s been holding back investment. That will absolutely make a difference. But that really is about our growth over the long term. So we also need to make it easier for CFOs across the land to say ‘right, as a result of the decisions that have been taken at this budget and in future budgets, I’m going to decide to invest more in the UK. I’m going to take a risk on someone who maybe has been out of work for a period of time.’ Because we know there are over 9 million people who’ve been out of work and we need to help them into work and make sure that they are able to contribute to our economy.

Krishnan Guru-Murthy: But in the short term, you’re asking, I mean, having had a tax raise, you now want a tax cut in business rates? I mean, do you want that for everyone or do you want that to be just targeted at the people who are really struggling?

Rain Newton-Smith: What we’re saying is you need to reform business rates to really make it easier for businesses to invest, in making their buildings more energy efficient, to invest in building and expanding some of our transport infrastructure. There are things that can be done to reform the business rate system to really get investment and growth going. That isn’t something that’s going to be done tomorrow. That is something that the chancellor has committed to but will be implemented over the next 18 months.

Krishnan Guru-Murthy: How worried are you that I mean, you know, you’ve said your ‘don’t do it again’, but ultimately, if more money is required, the government is still committed to not raising income tax and VAT and National Insurance for employees. It might come back for more in some other form, mightn’t it?

Rain Newton-Smith: Well, I think we will hold the chancellor to account for the words that she said at our conference today.

Krishnan Guru-Murthy: Well all she said is ‘we won’t raise National Insurance again.’

Rain Newton-Smith: But she said, ‘I took the tough decisions at this budget so I wouldn’t have to come back for more next year.’ And so she knows that we need to see business investment growing. She knows we..

Krishnan Guru-Murthy: What if we have to double defence spending. If Donald Trump pulls the plug…

Rain Newton-Smith: The chancellor will always have tough choices to make, but what’s really important is when she is making those decisions, she talks to the CFO, she talks to businesses who are really on the front line of making those decisions as to, ‘do I invest now in the UK? Do I take a chance on hiring more people? Do I open that new store?’ Because those are the difficult decisions business leaders have to make. They want to invest in the UK. They want to be creating jobs. But we’ve got to make it easier for them to say, ‘I’m going to invest now. I’m going to create those jobs today.’