CBI and Fox urge Chancellor to issue tax and labour law reforms in Budget

Posted on 22 Feb 2012 by Tim Brown

The CBI today called on the Chancellor to use his March 21 Budget to make changes to the UK tax system and give a £500m boost to business through a series of “targeted and modest” tax cuts.

The lobbying organisation argues that such a move would help persuade businesses to invest in the UK and further stimulate growth, boost investment for mid-sized businesses and improve access to credit across the country.

The CBI’s latest tax proposals include: a new capital allowance to attract investment into types of infrastructure which do not currently qualify; new forms of finance to help companies grow and take on staff; and ways to ensure environmental taxes help to encourage new growth. Late last year, the EEF also revealed its position on environmental taxes.

John Cridland, CBI director general
John Cridland, CBI director general

In his submission, John Cridland, CBI Director-General, said the Chancellor had to “score” the growth and policy “goals” he put forward in his autumn statement.

“Delivering private sector investment in infrastructure, supporting mid-sized businesses, hammering out the details on credit easing, extending the Youth Contract to 16 and 17-year-olds, and introducing the New Build Indemnity Scheme for mortgages at the earliest opportunity will all provide a real boost for UK growth and jobs,” Cridland said. “With our economy firmly under the international spotlight, there is no time to lose: Plan A plus must become a reality.”

The CBI’s announcement came as former defence secretary Liam Fox wrote, in a  letter to the Financial Times, that the Budget must also include measures to deregulate the labour market to “restore competitiveness” and make it easier to take on and remove staff.

 Former defence secretary Liam Fox says the budget should make it easier to hire and fire
Former defence secretary Liam Fox says the budget should make it easier for businesses to hire and fire

The MP, who has kept a low political profile since his resignation from the cabinet in October, also urged the Government to cut employers’ national insurance contributions “across the board”, paying for the move with the proceeds of spending reductions.

“The Budget must confidently assert that capitalism works,” he said. “It is too difficult to hire and fire, and too expensive to take on new employees. It is intellectually unsustainable to believe that workplace rights should remain untouchable while output and employment are clearly cyclical.”

He added: “There is a strong argument for further public spending reductions – not to fund a faster reduction in the deficit, but to reduce taxes on employment.

“Although the coalition agreement may require the chancellor to raise personal tax allowances, he should use the proceeds of spending reductions to cut employers’ national insurance contributions across the board.

“If that is deemed impossible, he should consider targeting such tax cuts on the employment of 16 to 24-year-olds, making them more attractive to employers.”