Short-term savings equal long-term failings

Short-term, short-sighted spending cuts will prove a false economy by failing to tackle the North East’s burden on the health and welfare system, NECC has warned ministers.

 In its submission to the Comprehensive Spending Review, NECC urges the Government to avoid ill-considered ‘quick wins’ and to instead make radical savings by tackling the region’s long-term economic under-performance.

 By supporting a series of funding priorities set out in its submission, NECC suggests the Government can tackle the costly symptoms of a historically sluggish economy which has consistently led to a high financial dependency in areas such as benefits, unemployment and poor health.

 With employment standing 2.7 percentage points behind the national average, the cost of employment policies to the UK coffers is 26 percent higher than the national average at £64 per head compared to £50 nationally. Social protection bills come in at 12 percent higher at £3,671 per head compared to £3,268 nationally and health costs are 10 percent higher at £1,949 per head compared to £1,775 nationally.

 But NECC stresses the potential of the region’s growth in sectors including renewable energy, low carbon vehicles, process industries, digital and healthcare – citing a series of impressive statistics including the fact that prior to the onset of recession in 2008, the North East was the fastest growing region.

 And it claims the Government can help the region to help itself back into growth by re-focusing its spending over the coming Parliament in key areas including transport infrastructure, access to finance for business growth and training and apprenticeship schemes.

 Ross Smith, head of policy and research, at NECC said: “We want the Government to avoid tinkering around the margins on budgets which are important to businesses  in search of quick fixes because this will prove a false economy. Instead we are calling for a longer term view which will reduce the need for persistent high spending in areas such as welfare and ill health.

 “Way too much has been spent on the symptoms of an under-performing economy for way too long. This region needs the right investment to work itself out of that situation and to begin maximising our returns to the UK economy. We are warning ministers against making cuts that will hinder the region’s vital growth prospects and will ultimately prove extremely costly.”

 The NECC submission also calls on the Government to stop relying on the South East alone and look instead to the regions for the economic growth the UK desperately needs to get back on its feet.

Headlining recommendations featured in the submission include:

  • Public procurement

The submission states: “The public sector is a significant customer to businesses in the North East. NECC is concerned that ‘back office’ savings will be pursued in the public sector without understanding of the unintended consequences of measures designed to improve efficiency in public procurement, such as use of national frameworks, reverse e-auctions and aggregated contracts. The implications these methods have on regional supply markets are not understood as no significant research appears to have been done. NECC believes this needs to be investigated in detail to ensure measures are not implemented which could constrain the growth of medium-sized firms, create effective monopolies or diminish competition for future contracts.”

 NECC points to its Buy North East campaign as a way forward, helping regional businesses to make the most of procurement opportunities and prevent a ‘closed shop’ environment where regional companies are unable to bid for contracts.

  •  Infrastructure

The submission states: “Despite the tightness of public finances, NECC believes capital investment in infrastructure should be seen as a spending priority. NECC believes a strategic approach to infrastructure planning for the North East is vital, but has not been taken adequately for a number of years. Due to the time taken to complete infrastructure projects and the need to work within finite resources, this strategy must look decades ahead.”

  •  Access to finance

The submission states: “Access to finance at affordable levels for business is clearly a significant issue across the UK. However, in the North East there are also specific challenges relating to growth capital. There is concern that many public and private funds which are based remotely from the North East cannot identify opportunities for this region. NECC was therefore strongly supportive of a JEREMIE fund financed by the European Investment Bank in the North East, now branded Finance for Business North East. This fund should be continued and given time to realise benefits, with investment decisions taken within the North East where opportunities can be understood.

 “The introduction of a state-backed export credit insurance scheme, along the lines of those adopted by some the UK’s biggest European competitors, would help offset the damage done by the export insurance market caused by the credit crunch and remove the risk factor for many first-time exporters.”

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