Cut business taxes to boost growth and avoid an economic crisis, business leaders warn
Britain faces an economic crisis and the next Prime Minister must focus on boosting growth, business leaders have warned.
In a letter to Conservative leadership candidates, lobby group the CBI said Boris Johnson’s successor must have a ‘serious, credible and bold’ plan for the economy.
The Tories vying for the top job have been promising a string of headline-grabbing tax cuts to win over MPs and party members.
In an open letter to Conservative leadership candidates, the CBI said Boris Johnson’s successor must have a ‘serious, credible and bold’ plan for the economy
But the CBI called for tax changes that ‘trigger business investment not fuel inflation’. And it warned against tax cuts aimed at simply boosting household spending such as reductions in income tax or VAT.
‘Growth that relies on only government or household consumption is doomed to fail, especially at a time of rising inflation and high debt,’ wrote Tony Danker, director-general of the CBI.
The lobby group has repeatedly called for a permanent successor to the Super Deduction – a temporary tax break brought in during the pandemic which allows firms to cut their tax bill by investing in plant and machinery.
Business rates on commercial properties must also be urgently reformed as they are the ‘most punitive business taxes in the UK’ and are leading to higher prices on the High Street, the CBI said.
And the hike in corporation tax from 19pc to 25pc next year must be suspended, the CBI said, as it was ‘never intended to come in as growth weakens’.
In fact, the business group warned, the next Prime Minister should closely examine the entire tax burden on business to make sure the UK is still a competitive place for companies to call home.
Danker said: ‘We are currently set for just 1pc growth in 2023 and to continue to languish at the bottom of the G7 table on business investment.
‘It won’t take much to tip us into a recession and, were that to pass, it would prolong the cost of living crisis.’
In a separate report, the Resolution Foundation and the London School of Economics (LSE) said the UK’s ‘toxic combination of low growth and high inequality’ had left it trailing behind other major economies.
This was leading to ‘disastrous consequences for low and middle-income households’, it added. While the top 10pc of households in Britain are richer than those in many other European countries, those of middle-income are not.
If the UK had the average income and inequality levels of comparable countries such as Australia, Canada, France, Germany and the Netherlands, the report added, typical household incomes would be a third or £8,800 higher.
The calls from the business leaders and think-tanks were echoed by Parliament’s Treasury committee. The MPs said the Government’s ‘chop and change’ approach to economic strategy was ‘concerning’ after its Industrial Strategy was scrapped and replaced with the Plan for Growth last year.
Chairman Mel Stride said: ‘Getting a grip on productivity will be key to kick-starting economic growth and stimulating greater business investment in the UK.’