CBI warns of rising taxes and stagnant business investment under Boris Johnson
One of the UK’s most influential business groups has cautioned Boris Johnson about recent tax rises, warning that he must concentrate more on stoking business investment post-Covid.
CBI director-general Tony Danker will tomorrow tell the Alliance Manchester Business School that a “return to business as usual in our economic policy, at this unique moment in British economic history, would be a mistake”.
Danker’s speech comes after Johnson this week rose National Insurance and dividends tax by 1.25 per cent each to pay for a £12bn a year increase in NHS and social care spending.
The increase in National Insurance broke a Tory manifesto promise from the 2019 election, however Johnson said that “a pandemic was in nobody’s manifesto”.
The move has been much maligned by business groups, including the CBI and Federation of Small Businesses, and libertarian Tory MPs.
Speaking tomorrow, Danker is expected to say that the government should look at “smarter taxation” to boost business investment post-Covid and post-Brexit.
“After the pandemic, we in business believe that we should pay our fair share to tackle the debts of Covid,” Danker will say.
“That is why many business leaders accepted the jaw-dropping six-point corporate tax increase announced in March. But there is a real risk now that the government will keep turning to business taxes to carry the load.
“Raising business taxes too far has always been self-defeating as it stymies further investment. And it misses a smarter way to view business taxation. To flip it on its head. If we want to kickstart the growth capital we need for the next decade, we should do so by rewarding those businesses who choose to invest.”
Danker will also say that the govenrment needs to find solutions to counter the increasing labour shortages in the UK economy.
He is expected to say: “If you want to solve the immediate shortages, you’re going to need to use the new immigration system we developed post-Brexit to bring in only the skills we need. It was built for exactly this situation.
“And if you want to fix the long-term challenge, we need business, government and learners to invest more in skills development.”
Responding to the speech, a Treasury spokesperson said: “This government has consistently backed business. Throughout the pandemic we supported businesses through our £400bn plan for jobs – which includes £80bn in loans, £25bn in grants, £16bn in business rates relief and our £68.5bn furlough scheme.
“We’ve also shown we are committed to supporting business investment, extending the Annual Investment Allowance increase for another year and introducing the super-deduction – the biggest two-year business tax cut in modern British history.
“The impact of the pandemic means we have had to make the tough but responsible decision to raise taxes – we’ve asked both individuals and businesses to pay a bit more as we get our public finances back on a sustainable path.”