A Rapid Payback Budget

Industry is now focussed almost entirely on “stopping the bleeding” with forward thinkers looking at what can be done on positive cash flow. Hence my suggested three point plan:

 

1) 100% capital allowances and zero valuation for business rating purposes for new investment in permanent communications infrastructure between now and 2012.
 
The aim is to pull through investment and ensure that what is installed for the Olympics is not ripped out afterwards but transforms local connectivity, without the need for subsidies and grants that are unaffordable for the foreseeable future.
 
I recall a study showing that, but for imported equipment, PAYE on the construction workers meant such 100% capital allowances would be fiscally neutral in the short term and a significant revenue earner for Treasury in the longer term. The way in which business rates block new investment, including that funded by HMG and EU, mean the benefit far outweighs any cost
 
The 2004 report on the effect of Business Rates on the Communicaitons Industry, commissioned by the DTI from GVA Grimely, has never been published.
 
2) Base business rates on shared communications networks (for example integrated security  networks to support traffic lights, CCTV cameras, emergency services and the alarm services of the local high street businesses and domestic properties) on apportionment of use – not “all” (if they have mixed usage) or “none” (if dedicated to a single non-rated function).     
 
The current situation gets in the way of cost-effective procurement and service delivery as well as being a major deterrent to investment. Reform could cut 70% of Government’s communications spend by removing the barriers to shared communications services. To the savings can be added the revenues from private sector use of the shared services: perfectly legitimate under EU rules provided there is no cross subsidy. 
 
3) Allow personal spend on retraining, including by independent contractors, to be fully offset against tax and trainees following professional accredited programmes to be wholly or partially exempted from PAYE.
 
Section 8.5 of the 1996 IT Skills Trends Report contains an analysis requested by Gordon Brown when he was still Shadow Chancellor on how to ring fence the exemption of trainees from PAYE so that it would be fiscally neutral. Tax incentives have long been resisted by Departmental Civil Servants even more than by those in Treasury. They much prefer tax and spend (under thier control). They resisted the regional pilots to test the ideas in the 1996 report, just as strongly as they resisted the imposition of industry strength quality control on the Millenium Bugbuster Programme. The results of neither have been published.   
 
I could add a number more ideas – mainly around the need to make it much easier for departments and agencies to organise incremental programmes of rapid payback projects which can improve service and cut cost at the same time by co-operating across silo boundaries – but thee points is enough for starters.
 

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