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CBI Director-General says higher business taxes and lower business investment are not a plan for growth

  • Monday, September 13, 2021
  • Events

In a speech at Alliance Manchester Business School today, CBI Director-General Tony Danker said the government was faces choices that will define a decade. “We’re at an inflexion point. Brexit, COVID-19, climate change. All demand that the UK forges a new growth story to compete in the world.”

Mr Danker said in recent months he had talked to hundreds of UK businesses, many of whom are global firms or have global customers. “They tell me what other countries are doing – the strategies they have, the investments governments are making, and how the UK compares.

“One of the great risks of the Budget, the Spending Review, and the Global Investment Summit – all set for this autumn - as well as our net-zero strategy, infrastructure strategy, and skills policy, is that we are too complacent, too proud about what we’ve done so far. That we regard the benchmark as beating the policies of UK governments past, rather than global competitors present.

“But the 2021 reality is quite different. Over the last two years, every country’s strategy to win the future has shifted dramatically. Every country is choosing to invest in the future, the future engines of economic growth.”

National Insurance rise

After last week’s government announcement on plans to increase National Insurance Contributions to support social care, Mr Danker said UK business is clear that the time for further business tax increases must end. Instead, he said the government must use the autumn to “flip business taxation on its head” and reward those firms who invest.

“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. And government holds the key to unlocking it all.

“Looking forward, it’s clear that consumption is likely to rage in the short run. Consumers have saved and will spend. So, watch the news in coming months and you’re likely to feel that things are going well. But unless investment catches up, rather than falls behind, that story will be short lived.

“After the pandemic, we in business believe that we should pay our fair share to tackle the debts of COVID-19. That is why many business leaders accepted the jaw-dropping six-point corporate tax increase announced in March. 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. And I am deeply worried the government thinks that taxing business, perhaps more politically palatable, is without consequence to growth. It’s not. Raising business taxes too far has always been self-defeating as it stymies further investment.”

Investment

Mr Danker identified four key levers the government should now use to get businesses investing more:

Smarter taxation – reward those firms who invest; for example, stop punishing greening UK building stock through business rate increases

New skills for new markets – creating individual training accounts to more easily access support, for those most in need and/or out of work

Catalytic public investment - to speed up the development of major infrastructure projects, new industries, and cutting-edge tech

Market making – replicate the successes of offshore wind in hydrogen and other emerging industries and fundamentally rebalance UK economic regulation

Labour shortages

Mr Danker also commented on the current labour shortages in sectors such as logistics, transport, food and drink, and manufacturing.

“It’s uncomfortable to hear, but we’ve benefitted from abundant labour for a long time now. Yet the labour shortages we’re hearing about aren’t something businesses can resolve by simply increasing hourly rates. We need to be honest about what this is going to take rather than government pretending firms can solve this overnight.

“If you want to solve the immediate shortages, you’re going to need to use the new immigration system we developed post-Brexit to bring in only the skills we need. It was built for exactly this situation. And if you want to fix the long-term challenge, we need business, government and learners to invest more in skills development.”

Levelling up

Regards infrastructure, he added that uncertainties around government investment, commitments and financing models continue to delay key projects, denting market confidence and hampering regions’ ability to level up.

“This includes HS2, road improvements in the South East and South West, the Heathrow Expansion and regional airport projects like Bristol and Leeds Bradford. The government’s new infrastructure delivery taskforce, Project Speed, can help address this. But action from the UK Infrastructure Bank, working with the Infrastructure and Projects Authority, is needed to overhaul the pipeline, plug the detail gaps and boost investors’ confidence.”

After his speech Mr Danker was joined on stage by Professor Dame Nancy Rothwell, President and Vice-Chancellor of The University of Manchester, who led a Q&A discussion.