Chancellor’s cuts draw mixed reactions

REACTIONS from Peterborough businesses to the comprehensive spending review announced by chancellor George Osborne (left) yesterday have been mixed.

Simon Chaplin, director of Peterborough accountants GreenStones, said, “We all know that the government had to act. Nevertheless, in seeking to cut our deficit faster than anywhere else in the world at such a fragile stage in the economic recovery they are gambling on an unprecedented scale. Essentially they are betting on businesses in our region, and elsewhere, digging the country out of the hole by filling the gap left by the £81bn in cuts and 490,000 job losses. And that is undoubtedly a very big ask.

“If the country is going to avoid the devastating effects of losing that bet, businesses in our region are going to have to step up to the plate by becoming more successful so that they create more demand, more jobs and more wealth. And that means that local entrepreneurs must leave no stone unturned in their drive to become better at everything they do. Simply repeating the past won’t be good enough. Businesses must innovate. They must test new ideas and actions. They must measure how well those innovations work. They must build on the things that are proven to work best, and they must stop doing the things that don’t work so well.

“To play our part in ensuring that the country wins rather than loses, [here comes the plug – ed] GreenStones is offering a free Business Builder meeting to any of the region’s businesses. The meeting will help them discover new ways to create more jobs, profits and wealth, and turn them into an improvement action plan so that things really do get better.”

Neil Darwin, director of economic development at Opportunity Peterborough, said, “Yesterday’s spending review is something of an anti-climax for Britain’s businesses and local economies. The cuts we know about are as severe as expected, but there is still a huge amount of detail lacking as to exactly where and how they will fall in the towns and offices around the UK.

“What we do know for sure is that the loss of nearly half a million public sector jobs, a move to ‘modest’ capital investment in social housing funding and the curtailing of welfare benefits across the board will put a major stranglehold on our regional economies. For cities like Peterborough that have significant economic and sustainable development ambitions, attracting inward investment and maintaining growth will now be an uphill struggle. Unlike our larger counterparts – Manchester, Bristol, Birmingham and indeed London – we have a much less resilient and established private sector base to counteract the loss of public sector spend and face a potential chasm in infrastructure funding unless we can look at innovative sources of income and make best use of assets across the whole public sector.

“Clearly, there will be economic fall-out at a local level and belts will have to tighten, but whilst the austerity measures may stem our growth ambitions they do not quell them entirely – we just need to be realistic. The good news for Peterborough is that we still boast a low cost of living combined with a high quality of life, housing will remain relatively affordable compared to the wider region and the growth of emerging sectors in the region should give us immunity against the worst of the cuts. The environment sector in particular – which is so prominent in Peterborough’s business landscape – seems to be one of the few winners in this review with the creation of a Green Investment Bank and further funding for wind power investment.

“Staying committed to sustainable and economic development in the coming years and months will be tough, but we like other vital, local economies across Britain, must be sure to grow, not slow in the austerity aftermath or risk being overwhelmed by it.”

Keith Hamilton, head of external affairs for EEF, which represents manufacturers in the east of England, said, “There will be some relief for manufacturers that the cuts were not as bad as feared, with some positive announcements in the protection of the science and education budgets and support for low carbon technologies. The private sector will have to play a much bigger role in the future of the economy and while the statement showed that the Chancellor understands the areas on which to focus, we now need the detail of how we are going to get there.

“However, for companies the suspense is not yet over and they need clarity on the government’s strategy for growth and, in particular how it will work with the private sector to leverage investment. Industry has already started to increase its investment but this will only be sustained if the government sets out a clear framework for the longer-term.

“We welcome the commitment to apprenticeship funding and high level skills training but, as with many areas of government spending, this needs to be matched with reform to deliver a responsive skills system that is built to last.”

“Industry will welcome government investment to support carbon capture and storage and the development of low carbon industries in the UK. However, the current level of funding for the Green Investment Bank will not deliver the private investment necessary and we still need greater clarity on the Bank’s remit.”

“The extra money for the Regional Growth Fund will also be critical in funding important investments in our infrastructure but industry will need clear guidelines as to how it will operate and how funds will be accessed.”

Graeme Leach, chief economist at the Institute of Directors, said, “There is far too much negativity around the spending review. It is not the end of the world, far from it. We know this because of two important fiscal lessons from the 1990s. First, between 1991 and 1997 public sector employment fell by 600,000 – roughly on a par with the falls projected as a result of the spending review – but this did not prevent a sustained upturn in economic growth. Second, over the 1997-99 period fiscal tightening resulted in public spending falling sharply as a proportion of GDP, but this did not prevent the economy recording its fastestperiod of growth over the past 20 years.

“The economic backdrop to this fiscal tightening is clearly weaker now than in the 1990s, but this merely suggests that GDP growth won’t rise as much as then. It does not lead to an automatic conclusion that the public spending squeeze will trigger a double-dip recession. In the long term spending cuts will be positive for economic growth. Tax rises would damage the economy in both the short and long term.”