Following on from my last blog, I thought it would be apt to share some thoughts on the Government’s Spending Review now that the headlines have had time to sink in. 

The Government has taken a gamble in endeavoring to cut back the deficit within the life of this Parliament. One of George Osborne’s key assumptions seems to be that the private sector will be able to fill the potentially heavy job losses in pubic sector by private businesses creating new employment opportunities. He received an unexpected boost following the review with the announcement of the UK’s quarterly growth figure of 0.8 percent, which was well above expectations.  http://www.statistics.gov.uk/cci/nugget.asp?id=192

There is little doubt that the cuts will have an impact on public sector jobs – which is the main employer in many communities – and that this will have a knock-on effect in the private sector, at least in the sort-term, both in terms of jobs and investment. The Chartered Institute of Personnel and Development (CIPD) fuelled this gloomy prognosis estimating that 900,000 jobs in the private sector alone will go due to the spending cuts and VAT increase.  http://www.cipd.co.uk/pressoffice/_articles/Treasuryselectcommittee011110.htm

 However, my sense is that the effect of the Spending Review on business as well as local communities has so far been somewhat overstated.  It remains possible, and some would say likely, that the economic recovery could well turn out to be a slow.  If this turns out to be the case, my concern is that while there's no shortage of entrepreneurial talent to address the challenges facing our economy, there is a critical shortage of support and funding to back them to do the job that the country needs them to do.

Business organisations are regularly calling for a reduction in red tape and for the banks to free-up credit lines. Others are campaigning for incentives such as temporary suspension of National Insurance on start-up companies and more favourable Corporation tax rates to encourage re-investment.

My personal hope is that the government will see fit to support the enterprise economy as it assesses opportunities following the toughest spending settlement in decades.  In my view this would be done best by lowering business taxes and simplifying the tax system to boost growing businesses.

Only time will tell if the Government was correct in it’s approach to tackling the deficit.  In the meantime the private sector needs to respond to whatever the fall-out is in the public sector.