Business Maverick

Business Maverick

U.K. Business Warns Tax Hikes Risk Strangling Economic Growth

Boris Johnson, U.K. prime minister, during a news conference inside number 10 Downing Street in London, U.K., on Tuesday, Sept. 7, 2021. Photographer: Neil Hall/EPA/Bloomberg

U.K. Prime Minister Boris Johnson risks strangling growth with higher taxes on business to fix the public finances in the wake of the coronavirus pandemic, the country’s biggest business lobby said.

The blunt criticism comes less than a week after Johnson and Chancellor of the Exchequer Rishi Sunak raised payroll levies on workers and companies to help fund health spending. But at a time of ultra-low government borrowing costs and a recovery that’s starting to stumble, many have questioned the timing.

“I am deeply worried the government thinks that taxing business — perhaps more politically palatable — is without consequence to growth,” Confederation of British Industry Director General Tony Danker will say in a speech on Monday. “It’s not. Raising business taxes too far has always been self-defeating as it stymies further investment.”

Danker’s remarks, emailed in advance by his office, highlight the growing unease among corporate leaders about Johnson’s approach toward business. Companies are also concerned about labor shortages and supply chain delays in the wake of Brexit, and have long sought reforms to business rates levied on shops.

Johnson will attempt to reach out to business on Monday by announcing plans to support 425,000 jobs a year over the next four years, as part of a previously-announced 650 billion-pound ($900 billion) package of private and public investment in infrastructure projects over the next decade.

The Treasury will also publish a new jobs update, setting out how people and businesses have been supported through the pandemic. “Business confidence is growing and thanks to the action we’ve taken, we’re expected to see two million fewer people out of work,” Johnson said in an emailed statement.

‘Reward Investment’

Danker said Johnson and Sunak should “flip business taxation on its head” and reward investment. Otherwise, he warned, any positive economic story will be “short lived.”

Danker will urge the government to:

  • use the immigration system to solve labor market shortages
  • overhaul Solvency II regulations for the insurance industry to unlock institutional investment in new assets
  • address the country’s “seismic” re-skilling needs
  • push ahead with infrastructure projects such as the HS2 high-speed rail link, and the expansion of London’s Heathrow airport and regional airports

While Sunak introduced a special tax break on investment in March, it’s due to phase out at the end of the 2022-23 tax year, the same time as corporation tax rises to 25% from 19%.

Danker, pushing for more incentives, pointed to decline in business investment to about 10% of output in 2019 from 14.7% in 1989.

“It’s a terrible time to be poor at investment,” he said. “All the prizes, from AI, fintech, genomics, renewables, are in industries where success requires new investment, and where other large economies are investing now.”

Gallery

Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

X

This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.


Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

A South African Hero: You

There’s a 99.7% chance that this isn’t for you. Only 0.3% of our readers have responded to this call for action.

Those 0.3% of our readers are our hidden heroes, who are fuelling our work and impacting the lives of every South African in doing so. They’re the people who contribute to keep Daily Maverick free for all, including you.

The equation is quite simple: the more members we have, the more reporting and investigations we can do, and the greater the impact on the country.

Be part of that 0.3%. Be a Maverick. Be a Maverick Insider.

Support Daily Maverick→
Payment options

MavericKids vol 3

How can a child learn to read if they don't have a book?

81% of South African children aged 10 can't read for meaning. You can help by pre-ordering a copy of MavericKids.

For every copy sold we will donate a copy to Gift of The Givers for children in need of reading support.