Perils of more business taxes - Beckie Hart

Post-pandemic recovery still sits at the top of the agenda, which means rebuilding confidence as we learn to live with the virus. It means addressing the skills shortages which are biting deeply and laying longer-term foundations to future-proof our workforce. As last week’s July GDP figures showed, we cannot be complacent about the UK’s economic recovery.

Beyond this immediate priority lie other key challenges. Tackling the climate emergency is a society-wide imperative, while converting ‘levelling-up’ from pithy slogan to meaningful action is crucial. For Yorkshire and the Humber, overdue improvements to physical infrastructure and digital connectivity, alongside action to attract investment and enhance labour markets, can be transformational.

Yet none of these things can happen without a healthy, thriving business community. Public sector spending can lay the foundations, but it is businesses which ultimately drive investment, create opportunities, boost aspirations and raise living standards.

To be blunt, enterprise must prosper if the region we call home – and the rest of the country – is to succeed.

That is why CBI Director-General Tony Danker has issued a bold call to Government to make the ‘big choices’ needed to unleash business investment, to help the UK ‘forge a new growth story to compete in the world’.

First on the list should be to flip business taxation on its head – ending the reliance on business taxes as a way to finance public spending, which risks stymying growth, and instead rewarding companies looking to invest.

Business investment is a critical component of a high-growth, sustainable recovery. Moreover, it will be key to building beyond mere recovery, and transforming our economy into one which is globally competitive in industries of the future.

Investing in the UK, investing by the UK. That must be our mantra now – so that the decade ahead does not repeat the low growth, zero productivity of the decade past.

After the pandemic, we in business believe we should pay our fair share to tackle the debts of Covid. But there is a real risk now that the government will keep turning to business taxes to carry the load.

Choosing National Insurance for social care funding is the latest example. We all understand the need for overdue social care reform. Business leaders fear Government thinks taxing business – perhaps more politically palatable – is without consequence to growth.

It’s not. It leads businesses to delay – or even shelve – growth aspirations. Planned jobs never appear, new doors never get opened. Communities stagnate.

Repeatedly asking businesses to shoulder the cost burden misses a smarter way to view business taxation – flip it on its head. If we want to kickstart the growth capital we need for the next decade, we should be rewarding businesses which choose to invest.

Here’s an example of how our system is failing businesses – while also making a mockery of our commitment to net zero.

More than half of business investment is subject to business rates. UK property tax levels are four times higher than Germany. And firms are being deterred firms from decarbonising their operations – because investment in energy-efficiency measures can make them liable for higher rates.

We need to do better and be fairer and greener. We need to clear these anomalies and devise a tax system which rewards innovation and investment, instead of hindering it. Our competitors around the world understand this and are already acting. We cannot be left behind.

Beckie Hart is CBI regional director - Yorkshire

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