Business lobby groups are calling on the government to kick-start economic growth by including tax cuts for billions of pounds of investment and policies to tackle labor shortages in the Budget.
Chancellor Jeremy Hunt is expected to offer modest help to companies in the March 15 Budget, with no direct tax cuts due to public financial constraints amid the economic downturn.
Hunt has been prioritizing cutting inflation and reducing public debt, but came under pressure from business groups and Conservative MPs, including former prime minister Liz Truss, to do more to boost growth.
Employers’ group the CBI said on Thursday that Hunt should include measures in his £19bn Budget in 2023-24 to boost business investment and reduce labor shortages.
Business groups such as the CBI are concerned about the government’s “super cut” scheme for capital investment – a two-year measure that gives 130 per cent tax relief on company equipment purchases – due to expire in March.
Next month UK company tax will rise from 19 to 25 per cent, fueling fears that companies will cut back on capital spending.
CBI director general Tony Danker said: “This Budget is an opportunity to get the UK out of recession sooner rather than later and transform the UK into a leading and innovative economy.”
He said the end of the super deduction scheme along with the increase in company tax “will have a huge impact on investment and leave the UK a global competitor”.
Institute of Directors chief Jonathan Geldart said business wanted the government to produce “a credible medium-term plan to take us beyond the current macroeconomic difficulties to a path of sustainable growth”.
The IoD and Make UK, the trade body for manufacturers, have joined the CBI in calling on the government to introduce a replacement for the super cut measure.
The CBI has proposed that companies could initially write off 50 percent of their capital expenditure costs against tax, with the arrangement becoming more attractive as public finances improve.
Make the UK want the government to focus tax relief on investment in green plants and machinery. The IoD wants the super deduction scheme to be put on hold permanently.
The Federation of Small Businesses highlighted the future tax burden for companies – saying that from April the UK “will present the highest tax burden since Clement Attlee and Stafford Cripps in 1948”.
The FSB wants targeted help for small businesses, proposing that they can get business rates relief if they have premises worth less than £25,000. The current threshold is less than £15,000.
The FSB has also called for a delay to the government’s plan to reduce research and development tax credits for small companies from April.
“The chancellor’s budget will be one of the last chances in this parliament to have an impact on how the economy grows and whether people feel safe in their bank accounts,” FSB policy chair Tina McKenzie said.
With the government reducing subsidies for companies on their energy bills from April, the FSB and CBI want ministers to give vouchers to small businesses to help them invest in “green” improvements on-site, such as heat pumps, better insulation and solar panels. .
The IoD recommends a reduction in company tax for companies that have achieved net zero emissions, as well as tax credits for businesses investing in sectors with skills shortages.
Employers worry that growth is being hampered by a shortage of skilled workers.
The CBI is calling for government support to help parents return to work through free childcare for one- and two-year-olds. It also wants an independent review of the UK’s childcare system.
Danker said British parents face some of the highest childcare costs in the OECD. “We need to see immediate action to solve the workforce challenge as soon as possible. Without it, businesses are left to grow, invest and become more productive with one hand tied behind their back,” he said.
The CBI is also recommending a tax-free “cost of living” support allowance in 2023-24 to enable employers to help staff on lower incomes.
The FSB wants to exempt day nurseries from business rates, as well as increase the maximum amount parents can claim for childcare tax-free from £2,000 to £3,000 a year.
Create UK is proposing a new employer training fund which will provide tax relief to support reskilling and be funded through unused apprenticeship levy funds.
To tackle labor shortages, Make UK also wants the government to open its labor shortage list to attract more workers from the EU and other countries.
It also wants the government to clarify whether EU laws remain, change, or leave the UK statute book. “Employers value a stable and predictable regulatory environment,” says Make UK.
Hunt said that if he had any fiscal flexibility in the future, his priority would be to cut business taxes, but his allies said conditions in the March Budget could be limited.
The Treasury launched a consultation in May last year to “consider reforms to support the best business investment” after the super cut measures ended. “What we do depends on the state of the public finances,” said one Treasury insider.
Hunt also said that if corporation tax were to rise to 25 per cent in April, 70 per cent of companies – those making a profit of £50,000 or less – would not be affected.