CBI Outlines New UK Govt Business Wishlist

by Jason Gorringe, Tax-News.com, London

26 April 2010

The Confederation of British Industry (CBI), never backwards in coming forwards, has outlined what it sees as the economic priorities for the first 100 days of any new government.

Seeking certainty for the business community (a commodity in increasingly short supply in the run-up to the May 6th general election), the CBI urged any new government to set the tone "within weeks of taking office," arguing that businesses in the UK need "credible commitments to get spending under control". It also stressed the importance of targeted spending cuts (as opposed to the nebulous "efficiency savings" pledged by all three main parties) rather than tax increases.

In terms of business taxation, the CBI further stated that:

"Business taxes need to be competitive with those of other major industrial countries, and they must be both consistent and fair."

It went on to observe that:

"The current fiscal problems rule out immediate reductions in the overall burden of business taxes, but the new government needs to set a strategic objective over the medium term to drive the headline rate of corporation tax down to 18%."

And suggested that:

"Tax reliefs such as the R&D tax credit should not be cut to fund an overall decrease as they enhance the UK's attractiveness as a destination for high value investment and jobs. Above all, policymakers must remember that business taxes are paid for by the community as a whole – employees, customers and savers – rather than by some anonymous entity called a 'company'."

The CBI additionally urged any new government to provide a "global voice" for the UK business community, in Europe and internationally, and to put in place measures to "support those areas of industry where the UK has a competitive advantage," to increase access to credit for businesses (an issue of especial interest to SMEs and micro-businesses, which have suffered greatly in this regard during the economic slowdown), and to tackle youth unemployment by giving employers assistance to provide apprenticeship opportunities.

Unsurprisingly, in the area of spending cuts, the CBI argued that strong action needs to be taken on public sector pension liabilities (including introducing a cap over time), and proposed that private sector operators should be permitted to bid to perform certain functions that are currently in the public sector, suggesting that:

"The necessary (public) spending cuts should be seen as the catalyst for long overdue reforms that address inefficiencies in public sector supply chains, procurement processes and workforce management."

These proposals echo calls made by CBI Director-General Richard Lambert to Alistair Darling before the announcement of the election date last month, in which the Labour government was urged to deliver a "credible" plan for balancing its books by 2015-16, two years earlier than planned, in order to boost the UK’s fiscal credibility and foster economic growth.

In his letter to the Chancellor in March, Lambert observed that:

“The UK’s deficit, though worryingly large, is still manageable, but the government must act now to set out a convincing, credible pathway for balancing the books. It is critical that this budget provides credibility and direction on the public finances, and creates the right conditions for businesses to drive economic growth."

Ian McCafferty, the CBI’s Chief Economic Adviser, also expressed the belief at that time that a target date of 2015-16 for balancing the UK government's books "would send a powerful message to investors about the seriousness with which the UK is tackling the public finances."

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