British Prime Minister Boris Johnson risks strangling growth with higher taxes on business to fix the public finances in the wake of the COVID-19 pandemic, the country’s biggest business lobby said.
The blunt criticism comes less than a week after Johnson and British Chancellor of the Exchequer Rishi Sunak raised payroll levies on workers and companies to help fund health spending.
However, at a time of ultra-low government borrowing costs and a recovery that is starting to stumble, many have questioned the timing.
Photo: Bloomberg
“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 was to say in a speech yesterday. “It’s not. Raising business taxes too far has always been self-defeating as it stymies further investment.”
Danker’s remarks, e-mailed 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 would attempt to reach out to business yesterday by announcing plans to support 425,000 jobs a year over the next four years as part of a previously-announced ￡650 billion (US$900 billion) package of private and public investment in infrastructure projects over the next decade.
The Treasury would 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 e-mailed statement.
Danker said Johnson and Sunak should “flip business taxation on its head” and reward investment.
Otherwise, any positive economic story would be “short-lived,” he said.
Danker was to 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 is due to phase out at the end of the 2022-2023 tax year, the same time as corporation tax rises to 25 percent from 19 percent.
Danker, pushing for more incentives, pointed to decline in business investment to about 10 percent of output in 2019 from 14.7 percent in 1989.
“It’s a terrible time to be poor at investment,” he said. “All the prizes, from AI [artificial intelligence], fintech, genomics, renewables, are in industries where success requires new investment, and where other large economies are investing now.”
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