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The Chancellor’s most urgent priority at the Budget is to
support the economy through the final stages of the pandemic,
by extending furlough, the business rates holiday, welfare
support and the stamp duty holiday.
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Beyond that, the best long-term recipe for prosperity is to
prioritise growth over short-term deficit reduction.
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While any immediate tax rises would be a mistake, tax rises
on business would be a greater error.
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The CPS urges the Chancellor to adopt a robust pro-growth
agenda, including bounties for firms to create new jobs;
business rates reform; making the stamp duty holiday
permanent; and the introduction of full expensing to boost
investment.
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He should also set out a long-term ambition to give Britain
the most competitive tax system in the G20 by the end of the
parliament, in order to give firms and investors confidence
and drive growth and recovery
As the Chancellor prepares for Wednesday’s
Budget, his immediate priority is to continue to support the
economy through the final stages of the
pandemic.
However, a pre-Budget briefing note from the
Centre for Policy Studies, Britain’s leading centre-right think
tank, argues that he should also take the opportunity to set out
a vision of how the private sector can lead a robust
recovery.
There is a strong consensus among economists
that the immediate priority needs to be growth rather than
deficit reduction. Yet setting out a trajectory of future tax
rises – and in particular tax rises on business – risks damping
investment and consumer confidence.
The briefing note, ‘Budget 2021: A Recipe for
Recovery?’, sets out the case against the
rumoured increases in specific business taxes, such as
corporation tax, Capital Gains Tax or a windfall Covid profit
tax.
Its author Tom Clougherty, Head of Tax at the
Centre for Policy Studies, argues that the Chancellor should
extend the furlough scheme, welfare support, the business rates
holiday and the stamp duty holiday through the next few months -
and make the latter permanent.
He also proposes prioritising employment via
bounties for new employees (in the form of Employer’s National
Insurance rebates) and pausing the extension of the level and
scope of the National Living Wage.
To further help business, he argues for various
measures to encourage investment and productivity: reform to
business rates and the introduction of a form of ‘full
expensing’.
He also calls for judicious reforms to the
Capital Gains Tax system to better police the boundary between
earnings and profits – and urges the Chancellor to set out a
long-term ambition to give Britain the most competitive tax
system in the G20.
Tom Clougherty, CPS Head of Tax,
said:
'There will be a time for fiscal
conservatism, and for a balanced approach to deficit reduction,
but for now the overriding objective must be to go for growth.
That means rejecting rumoured tax increases on business and
investment, which would only undermine the recovery, and instead
charting a clear course towards an increasingly competitive tax
system.'
