Chancellor urged to cut business taxes now
Business leaders are telling the UK government that it must do more immediately to boost private sector investment, and not wait until the autumn.
19 May 2022The business chiefs were reacting to a speech in London on Wednesday evening by Chancellor of the Exchequer Rishi Sunak at the annual dinner of the Confederation of British Industry (CBI), during which he promised tax cuts on investments that would lead to higher productivity and improved living standards.
To see full video from Chancellor of the Exchequer Rishi Sunak click here.
But by Thursday morning there was confusion about when these tax cuts would be introduced. In pre-speech briefings, government press officers told journalists that Mr Sunak would be saying: "“We need you to invest more, train more and innovate more. In the autumn Budget we will cut your taxes to encourage you to do all those things."
But later, in the speech itself, the chancellor dropped any reference to the Budget and simply said: “As I’ve said previously, our firm plan is to reduce and reform your taxes to encourage you to do all those things.”
Even so, it is believed that, with the threat of a global recession looming, ministers are working on a plan as a matter of urgency to increase research and development allowances, and tax breaks on investments.
At the dinner, Lord Karan Bilimoria urged the government not to wait but to act immediately on the cost-of-living crisis and to help companies invest.
He described the introduction of a permanent successor to the 'super-deduction' scheme - a temporary, two-year programme introduced in March last year and offering 130 per cent tax relief on purchases of equipment - as being “of the utmost importance”.
Lord Bilimoria also called for tax incentives on R&D projects; for better regulations for innovation, starting with publication of the government's long-awaited Digital Strategy; and for action on business models for hydrogen production and carbon capture and storage.
He added: “From the tragic war in Ukraine to the after-shocks of the pandemic, we have seen an unprecedented two years. Working closely with the CBI, the chancellor delivered one of the largest pandemic-support packages in the world, protecting countless jobs, firms and communities.
"Just like the pandemic we’ll need to once again work together to help ease the pressures on businesses and communities across the UK. We must now not step back or divert our course, but double down on our growth ambitions."
Reacting to Mr Sunak's speech on Thursday, Tony Danker, director-general of the CBI, told BBC Radio 4's Today programme that Mr Sunak had not gone far enough and did not seem to have a plan “to help the hardest hit now”. He added: "There are some choices still to be made. And there are some choices you have to make about what you do now and what you do later.
"Look, you have to help the hardest hit now. Helping people with heating bills and eating bills will not fuel inflation. And you need to stimulate business investment now. That’s not going to overheat the economy now. It’s going to make sure that any downturn in our fortunes is short and shallow because growth is coming soon."
"So I think he’s got the principles right. But we didn’t hear last night firm decisions that will help the hardest hit now, that will stimulate business and confidence now, and will leave other stuff till later."
Craig Beaumont, chief of external affairs at the Federation of Small Businesses, told the Politico website: "To reduce taxes, the central challenge for the chancellor will be to reduce the cost of government, which has ballooned with civil servant numbers rising each and every quarter since 2016. Reversing this would free up businesses to spend money to ‘invest, retrain and innovate’ rather than handing it over to (the tax authorities at) HMRC.”To read full press release click here.
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To see full video from Chancellor of the Exchequer Rishi Sunak click here.
But by Thursday morning there was confusion about when these tax cuts would be introduced. In pre-speech briefings, government press officers told journalists that Mr Sunak would be saying: "“We need you to invest more, train more and innovate more. In the autumn Budget we will cut your taxes to encourage you to do all those things."
But later, in the speech itself, the chancellor dropped any reference to the Budget and simply said: “As I’ve said previously, our firm plan is to reduce and reform your taxes to encourage you to do all those things.”
Even so, it is believed that, with the threat of a global recession looming, ministers are working on a plan as a matter of urgency to increase research and development allowances, and tax breaks on investments.
Will the government reduce tax to help cost-of-living crisis?
Mr Sunak accepted in his speech that the UK needed "to overcome our long-standing weaknesses in investment, skills, and innovation"At the dinner, Lord Karan Bilimoria urged the government not to wait but to act immediately on the cost-of-living crisis and to help companies invest.
He described the introduction of a permanent successor to the 'super-deduction' scheme - a temporary, two-year programme introduced in March last year and offering 130 per cent tax relief on purchases of equipment - as being “of the utmost importance”.
Lord Bilimoria also called for tax incentives on R&D projects; for better regulations for innovation, starting with publication of the government's long-awaited Digital Strategy; and for action on business models for hydrogen production and carbon capture and storage.
He added: “From the tragic war in Ukraine to the after-shocks of the pandemic, we have seen an unprecedented two years. Working closely with the CBI, the chancellor delivered one of the largest pandemic-support packages in the world, protecting countless jobs, firms and communities.
"Just like the pandemic we’ll need to once again work together to help ease the pressures on businesses and communities across the UK. We must now not step back or divert our course, but double down on our growth ambitions."
Reacting to Mr Sunak's speech on Thursday, Tony Danker, director-general of the CBI, told BBC Radio 4's Today programme that Mr Sunak had not gone far enough and did not seem to have a plan “to help the hardest hit now”. He added: "There are some choices still to be made. And there are some choices you have to make about what you do now and what you do later.
"Look, you have to help the hardest hit now. Helping people with heating bills and eating bills will not fuel inflation. And you need to stimulate business investment now. That’s not going to overheat the economy now. It’s going to make sure that any downturn in our fortunes is short and shallow because growth is coming soon."
No firm decisions were made to help stop the rise in cost of living
Mr Danker agreed with Mr Sunak that "mass tax cuts" were not the answer to the rising cost of living. "I agree with him that if you do those things too early in this cycle, then you do risk putting up inflation," he said."So I think he’s got the principles right. But we didn’t hear last night firm decisions that will help the hardest hit now, that will stimulate business and confidence now, and will leave other stuff till later."
Craig Beaumont, chief of external affairs at the Federation of Small Businesses, told the Politico website: "To reduce taxes, the central challenge for the chancellor will be to reduce the cost of government, which has ballooned with civil servant numbers rising each and every quarter since 2016. Reversing this would free up businesses to spend money to ‘invest, retrain and innovate’ rather than handing it over to (the tax authorities at) HMRC.”To read full press release click here.
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Read more news and views from David Sapsted in the Spring 2022 issue of Think Global People.
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