UK Industry Group Warns Against Business Tax Rises

By Alexander Zhang
Alexander Zhang
Alexander Zhang
October 22, 2021 Updated: October 22, 2021

A leading British industry group has warned the government against announcing new business tax rises in next week’s budget, which it said would dampen the UK’s economic recovery.

The Confederation of British Industry (CBI) said on Friday that UK businesses share the government’s aim to boost private sector investment, but worry that the budget will not do what is needed to achieve its objective.

CBI Director-General Tony Danker said the recovery was fragile, warning ministers they were “betting the shop” on private sector investment without doing what it takes to attract it.

“We cannot take the economic recovery for granted,” he said. “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.”

Danker said there is a “fundamental inconsistency” between the government’s intention to unlock business investment and its tax rises, which has done the opposite.

Prime Minister Boris Johnson announced on Sept. 7 a new UK-wide 1.25 percent health and social care levy, which is based on National Insurance contributions.

Johnson said the £12 billion ($17 billion) tax hike was needed to reform social care funding and to help the National Health Service clear the backlog caused by the pandemic.

This was on top of Chancellor of the Exchequer Rishi Sunak’s announcement on March 3 that corporation tax will be raised to 25 percent from 19 percent from 2023.

The UK’s climate policy is also expected to exacerbate the tax burdens. A Treasury report published on Tuesday said the government may have to consider raising taxes to pay for the cost of its pledge to reach “net zero” greenhouse gas emissions by 2050.

CBI and other UK business groups have repeatedly urged the government to reward companies that continue investing instead of raising business taxes further.

“Business and government is united in its ambitions for the country,” Danker said. “But it will take more working hand-in-glove to actually achieve them.”

He said the government should not be “complacent” about growth, as “everyone knows” the economic recovery “will soon flatten out.”

Danker welcomed Johnson’s pledge at the Conservative Party conference earlier this month to reshape the UK economy towards a “high-wage,” “low-tax” system, but warned that “wage growth without productivity growth is a recipe for higher inflation” and “tax growth stunts investment.”

Danker said UK taxation is “already set to reach its highest sustained level in peace time,” and expressed dismay over “rumours that Cabinet ministers want bigger budgets and therefore we may be headed for even higher taxes.”

He said economic confidence has “dipped since the summer” and urged the government to use next week’s budget to change that. “Rather than more business taxes let’s have investment incentives,” he said.

PA contributed to this report.