Burnham should go on a ‘cost of doing business’ tour
An alarming note from one of the City’s top economists warns that October’s Budget could see taxes rise by almost the same amount as they did last year when Rachel Reeves cooked up £26bn worth of fresh hikes. Ruth Gregory, Deputy Chief UK Economist at Capital Economics, suggests that higher taxes “perhaps worth up to 0.8 per cent of GDP may do the heavy lifting in funding Prime Minister Burnham’s policy ambitions.”
Unsurprisingly, none of the possible ways in which this could be achieved are appealing.
Burnham has vowed to stick to the tax promises made in Labour’s manifesto, which rules out hiking income tax, employee National Insurance, corporation tax or VAT – which together account for 54 per cent of all revenue raised. This means that other taxes could be raised, new taxes could be created or the tax base could be expanded. The first option – increasing taxes not specified in the manifesto – could hit businesses hard, with the bank surcharge and other sector specific levies such as those on energy profits or digital services possibly on the table.
WIll businesses dodge a Budget bullet?
However, Gregory believes that if tax rises do come in the Autumn they’re more likely to fall on individuals and households, potentially via changes to pension tax, inheritance tax, capital gains tax and the taxation of wealth. Might businesses dodge a Budget bullet come October? They’ll be praying they do.
As we report today, the British Chambers of Commerce has calculated that “policy-driven costs” (in other words, burdens that originate from Whitehall) have gone up by more than 70 per cent in a decade. They find that a typical mid-sized firm (with 50 staff and a £5m turnover) now pays around £1.98m a year in domestic policy-driven costs, up from £1.16m in 2016. This figure includes minimum wage increases, employer NI, levies on energy bills, pension costs, business rates and regulatory compliance costs. It does not include corporation tax or general inflation in areas such as rent and input costs.
While successive governments have a lot to answer for, around a quarter of the cost increases slapped on business over the past decade came in the last two years.
This is the cost of doing business crisis. Against this backdrop, making it marginally easier for customers to cancel a subscription hardly warrants an announcement. The PM is currently on his ‘cost of living tour’ – let’s hope he uses it to talk to business owners.