For this Autumn Statement, the CPS’ ‘wishlist’ focuses on six areas that could help boost supply side growth: tax reform, infrastructure, free ports, housing, energy and corporation tax exemptions.
Tax Reduction and Simplification
The UK’s tax code is around 21,000 pages long and has around 1,100 tax reliefs. This complexity is causing problems for businesses across the country and has led to distortions in the tax system. The Government should focus on:
The Government has briefed newspapers that extra funds will be announced for infrastructure at the Autumn Statement. There are plans to spend an additional £1.3bn on road improvements and Hammond will also pledge a further £1bn to roll out ‘full-fibre’ broadband.
While Britain’s infrastructure is certainly in need of upgrading, the CPS’ latest economic bulletin “Infrastructure can be a bad investment” highlights the need for the Government to focus on improving the quality of infrastructure development, rather than simply allocating more public funds. Following the abandonment of the Private Finance Initiative, a new mechanism of attracting private finance in infrastructure is needed.
The Government should also reconsider one current proposal which could unintentionally delay or cancel private investment in UK infrastructure and real estate development: the new BEPs proposals. Originally designed to target tax-avoiding multinational enterprises, such as by certain tech giants and coffee brands, these could inadvertently impose significant burdens on those industry sectors which have high borrowing ratios (such as real estate and infrastructure investment).
European Union law has long held back the potential of British ports. In CPS report The Free Ports Opportunity, Rishi Sunak MP highlights how “Free Ports” could increase manufacturing output, reinvigorate the north of England, and promote trade.
Free Ports are areas that, although inside the geographic boundary of a country, are considered outside the country for customs purposes. This means that goods can enter and re-exit the port without incurring the usual import procedures or tariffs – incentivising domestic manufacturing.
Housing completions hit a seven year high in 2015, with nearly 143,000 homes being constructed. However, this still dwarfs the 320,000 homes needed annually to alleviate housing strains.
The UK’s Carbon Price is currently over £18 per tonne of CO2 emitted compared with an average of £6 in the EU. This needs to be cut before it forces the premature closure of more baseload power plants and thus threatens energy security and affordability. CPS Research Fellow Tony Lodge has advocated this in his publication the “Great Green Hangover”.
Corporation Tax Exemption
CPS Chairman Lord Saatchi has previously called for an end to corporation tax and capital gains tax for small firms. We are encouraged by recent findings of the Office for Tax Simplification, which suggests that some small businesses could pay income tax on profits directly rather than corporation tax.