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THE UNITED KINGDOM RESPONSE TO THE ECONOMIC CRISIS

By Samuel Hicks,2014-05-18 17:28
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THE UNITED KINGDOM RESPONSE TO THE ECONOMIC CRISIS

    UNITED KINGDOM

    In common with some other Member States, the United Kingdom does not have an Economic and

    Social Committee. This memorandum summarises the main British Government measures and

    the reactions of stakeholders such as employers, Unions and the media.

    1. MAIN STIMULUS MEASURES

    i. Cut in VAT from 17.5% to 15% (estimated to be worth ?12 billion). ii. Temporary increase in the threshold for rate (local taxes) relief on empty

    properties.

    iii. Exemption from tax on foreign dividends received by large and medium

    groups on most shares.

    iv. More generous tax relief for businesses making losses by allowing temporary

    additional carry-back of up to ?50,000 of losses to be set against taxable

    profits from the last 3 years.

    v. A deferment of a proposed increase in small companies‟ corporation tax

    retaining the rate at 21% for 2009/2010.

    vi. Helping SMEs with working capital and investment needs with a Small

    Business Finance Scheme through a new temporary guarantee scheme to

    enable up to ?1 billion of new government support for lending by banks. vii. UK small businesses should also be able to benefit from around ?4 billion of

    lending from the European Investment Bank (EIB) between 2008 and 2011. viii. A new Business Payment Support Service for businesses in temporary

    financial difficulties permitting them to delay payment of all taxes. ix. Bringing forward of ?2.9 billion of already budgeted public sector capital

    spending by 1 year. This includes ?700 million for road and rail, ?775

    million for housing and regeneration, ?800 million for schools, ?442 million

    for further and higher education and ?100 million for health services. x. A boost to training and apprenticeships

    xi. A temporary guarantee scheme to support a ?1 million facility providing

    smaller exporters with better access to short term working capital and an

    extension of the Fixed Rate Export Finance Scheme for another year after the

    end of 2008.

     .../...

    - 2 -

    2. BUSINESS AND UNION REACTIONS

The Governments handling of the economic crisis has been criticised by both business and

    the Unions. Both call upon the Government to implement a more effective strategy to fight

    the recession.

The employers‟ body, the Confederation of British Industry (CBI), complains that the

    Government‟s economic recovery plans “lack a coherent strategy and timeline”. The CBI is

    also critical of what it calls the „welter‟ of recent initiatives such as those summarised above.

Britain‟s biggest Unions are concerned that the Government‟s plans are insufficient without

    „urgent assistance to UK manufacturing‟. They are calling for „crisis talks‟ with the

    Chancellor of the Exchequer for a „strategic support package‟ for the car industry.

The increase in the British jobless rate is naturally of concern to the Unions but is now

    coming to be widely shared by the working population and by the media. Signs of concern

    are everywhere from reduced numbers of British people taking their holidays outside the

    United Kingdom to trading down to cheaper restaurants or takeaways!

    3. MONEY MARKET TENSIONS

There is increasing concern that the Bank of England may resort to „quantitative easing‟. The

    phrase is coming to be interpreted as printing money and is criticised as being a charge on

    future generations.

Bryan Cassidy

    Chairman, Section on the Single Market, Production and Consumption

    21/02/2009

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