Business lobby groups have called on the government to kick-start economic growth by including tax breaks for billions of pounds of investment and policies to tackle labor shortages in the budget.
Chancellor Jeremy Hunt is expected to offer only modest help for companies in the March 15 budget, with no direct tax cuts likely due to tight constraints on public finances amid the economic downturn.
Hunt prioritizes reducing inflation and reducing public debt, but is under pressure from business groups and Conservative MPs, including former prime minister Liz Truss, to do more to boost growth.
The CBI employers’ group said on Thursday that Hunt should include measures in his budget costing £19bn in 2023-24 to boost business investment and ease labor shortages.
Business groups such as the CBI are concerned about how the government’s ‘super-rebate’ scheme for capital investment – a two-year measure that offers 130 per cent tax relief on companies’ equipment purchases – expires in March.
Next month UK corporation tax will rise from 19% to 25%, heightening fears that companies will cut capital spending.
CBI director general Tony Dunker said: “This Budget is the opportunity to get the UK out of any recession sooner rather than later and to transform the UK into a high-growth and innovation-first economy.”
He said the end of the super-rebate system along with the sharp rise in corporation tax “will have a huge impact on investment and leave the UK falling behind its global competitors”.
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 discount measure.
The CBI proposed that companies could initially write off 50% of the cost of any capital expenditure against tax, with the arrangements becoming more attractive as public finances improve.
Make UK wants the government to focus tax breaks on investment in green facilities and machinery. The IoD wants the super discount scheme to be maintained on a permanent basis.
The Federation of Small Businesses highlighted the future tax burden on companies – saying that from April the UK “will have the highest tax burden since Clement Attlee and Stafford Cripps in 1948”.
The FSB wants targeted help for smaller firms, proposing they qualify for business rate relief if they have premises with a book value of less than £25,000. The current limit is less than £15,000.
The FSB has also called for a delay to the government’s plan to cut research and development tax credits for small companies from April.
“The chancellor’s budget will be one of the last opportunities in this parliament to have an impact on how well the economy is growing and whether people feel it in their bank account,” FSB chair Tina McKenzie said.
With the government reducing subsidies for companies on their energy bills from April, the FSB and CBI want ministers to provide vouchers to small businesses to help them invest in ‘green’ improvements to their facilities, such as heat pumps , better insulation and solar panels. .
The IoD has recommended a reduction in corporation tax for companies that have achieved net zero emissions, as well as tax credits for businesses investing in sectors facing skills shortages.
Employers worry that growth is being hampered by a lack of skilled workers.
The CBI called for government support to help parents return to work through some free childcare for one- and two-year-olds. It also wants an independent review of the UK’s childcare system.
Dunker said British parents face some of the highest childcare costs in the OECD. “We need to see immediate action to urgently resolve the labor challenge. Without it, businesses are left scrambling to grow, invest and become more productive with one hand tied behind their backs,” he added.
The CBI also proposed a one-off tax-free ‘cost of living’ support allowance in 2023-24 to enable employers to help staff on lower incomes.
The FSB wants to exempt nurseries from business rates, as well as increase the maximum amount parents can claim for tax-free childcare from £2,000 to £3,000 each year.
Make UK has proposed a new employer training fund which would provide tax relief to support reskilling and be funded through unspent apprenticeship levy funds.
To tackle labor shortages, Make UK also wants the government to open up the shortage list to allow more workers from the EU and other countries.
It also wants the government to clarify which EU laws remain, change or are removed from the UK statute book. “Employers value a stable and predictable regulatory environment,” Make UK said.
Hunt has said that if he has fiscal room going forward, his priority would be to cut business taxes, but his allies said the situation in the March budget is likely to be too tight.
The Treasury launched a consultation in May last year to “consider reforms to better support business investment” once the super-rebate measure ends. “What we do depends entirely on the state of public finances,” said one Finance Ministry insider.
Hunt also said that although corporation tax rises to 25% in April, 70% of companies – making profits of £50,000 or less – will not be affected.