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.
“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.”
Alphabet Inc’s Google on Tuesday announced plans to buy a New York office building for US$2.1 billion, confirming its push into the US’ largest city despite the COVID-19 teleworking trend. This is the largest real-estate purchase in the US for an office building since the beginning of the global spread of COVID-19, the Wall Street Journal quoted Real Capital Analytics as saying. Google already rents the premises in Manhattan, which are located on the site of a former railroad terminal in the Hudson Square neighborhood. The Silicon Valley giant envisions a campus with a total surface area of 160,000m2 by mid-2023
‘CORE VALUES’: The contract chipmaker did not specify why the employees were dismissed, but media reports said they had leaked information about customer orders Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has fired seven of its employees for violating the company’s “core values,” the world’s largest contract chipmaker said yesterday. While the company did not disclose exactly why it fired the seven employees, local media reports earlier in the day said that the employees had leaked confidential information about customer orders. In a statement, the company said that it fired the seven at once, adding that it released an internal notice last week to inform the entire company of the move ahead of the four-day Mid-Autumn Festival holilday, which ended on Tuesday. TSMC said it fired the seven
MILD ADJUSTMENT: Two previous efforts failed to curtail mortgage financing, although the new measures should not affect property prices, the central bank governor said The central bank yesterday tightened credit controls for second-home mortgages in specific areas and purchases of plots of land, especially in industrial parks. However, the nation’s top monetary policymaker kept its policy rate at a record-low 1.125 percent for the sixth consecutive quarter, despite revising up its GDP growth forecast for this year from 5.08 percent to 5.75 percent. “Board members factored in economic uncertainty at home and around the world,” central bank Governor Yang Chin-long (楊金龍) said, adding that growing inflationary pressure was a temporary phenomenon induced by bad weather and a low base effect for oil prices. International fuel price increases
DOWNCYCLE: Most buyers are wary about placing new orders, and although the decline could also be as little as 3%, it would be the first drop since the start of the year The average selling price of DRAM chips next quarter is expected to decline by up to 8 percent quarter-on-quarter, with memory chips used in notebook computers and consumer electronics seeing the steepest decline due to excess inventory and a shortage of components, market researcher TrendForce Corp (集邦科技) said yesterday. That means the DRAM industry is entering a new downcycle after experiencing a boom for three quarters, the longest uptrend in the history of the industry. The Taipei-based researcher said it expects the balance between supply and demand to begin tilting toward a surplus in the final quarter of this year. Most DRAM