Viewpoint: The tonic the economy needed

The UK needed a faster and deeper deficit reduction package than was set out in the previous government's Budget in March; equally important to the scale of deficit reduction is the way it is done. Here again, the Chancellor chose the right route by concentrating overwhelmingly on closing the fiscal gap by lower spending instead of through higher taxation.

The Budget will not threaten economic recovery. On the contrary, it is likely to improve the economic outlook by showing that public finances are finally being brought under control.

Knowing that the deficit will come down is one less worry for companies and, together with the reductions to the main and small companies' rates of corporation tax, it will help business investment. We never expected the Chancellor to tick all the boxes on our wish lists, yet many were. Although unwelcome, the proposed changes to capital gains tax are a tolerable compromise.

A Policy Voice poll of 640 IoD members taken in the 24 hours after the Budget showed strong business support:
• 83% thought that the Emergency Budget would have a positive impact on the UK economy;
• 90% thought that the Emergency Budget had a positive impact in reducing the UK's fiscal deficit;
• 61% were more positive about the short-term economic outlook;
• 82% were more positive about the long-term economic outlook.

If the Budget's impact feeds through the system then we should see greater business optimism and, with time, higher business investment, which will help to create the wealth and jobs that the economy needs.

Graeme Leach, chief economist, Institute of Directors

Source: Professional Broking – July/August 2010