The Confederation of British Industry (CBI) has called on the UK government not to increase business tax rates in next week’s budget to help the economy recover from the Covid-19 pandemic.
In a press release published on Friday, CBI director-general, Tony Danker, said the government is ‘betting the shop’ on private sector investment but not doing what it takes to attract it. He also said that business leaders share Prime Minister Boris Johnson’s aims for the economy – but worries next week’s budget will not do what it takes to realise them.
“Next week is a defining moment for the government. We cannot take the economic recovery for granted. If the UK is to break out of a decade-plus cycle of anaemic growth and zero productivity, then the government has to get serious about what it will actually take to deliver that,” he said.
“There is a fundamental inconsistency where the government wants to unlock business investment, but its tax policies do the opposite. You cannot will the ends and ignore the means to turbocharge the economy. Every economist and business leader knows it,” Danker added.
First budget since the pandemic
The spending review next Wednesday will be the government’s first since the Covid-19 pandemic hit, and since Brexit kicked in.
“The Government shouldn’t be complacent about growth,” Danker continued.
“It’s true that we have rapid recovery currently, but everyone knows that will soon flatten out. The bigger question is whether the economic strategy gets us back to solid underlying GDP growth that we saw before the financial crisis, and a clear path to lifting productivity? Or are we going to continue the low growth and flatlining productivity we’ve had since 2008?”
Danker also noted that the prime minister has called for a high wage, high skill, high investment, high productivity economy, which he agreed with – but highlighted that wage growth without productivity growth is a recipe for higher inflation. And tax growth stunts investment, he said.
“UK taxation is already set to reach its highest sustained level in peace time. Corporation tax will soon jump a stunning six percentage points. National Insurance is set to increase to its highest rate ever. Fundamental reform of business rates has been delayed too long – with property tax levels the highest in the OECD, and four times higher than Germany, as a percentage of GDP. Now there are rumours that cabinet ministers want bigger budgets and therefore we may be headed for even higher taxes,” Danker also warned.
Supporting green business models
He also touched on the government’s global investment summit this week where its net zero strategy and plan was outlined. “The message from both was very clear: only private sector investment can realise Britain’s ambitions. But lift the bonnet and what we have is a tax regime that penalises investment, a regulatory model that does the same, and little clarity on the new green business models that investors are supposed to be backing,” he said.
Danker also talked about how the private sector was blamed for everything two weeks ago: fuel shortages, labour shortages, immigration, wages, skills and productivity – and how this week, it was wined and dined and asked to multiply its investment.
“Rhetoric aside, the reality is that economic confidence has dipped since the summer and next week has to change that. Rather than more business taxes let’s have investment incentives – building on the excellent but time-bound super-deduction.
“Let’s seize the moment, do what it takes and do it in partnership. Let’s go for growth that lasts. And let’s start at next week’s budget,” Danker added.