CBI: £9 billion-a-year policy burden could hinder business productivity

New analysis from the Confederation of British Industry (CBI) indicates that policy burden amounting to £9 billion per year has the potential to weigh heavily on businesses’ ability to deliver more jobs, secure investment and raise basic skills standards.

The UK’s leading business group fears a combination of business rates inaction, recent Government policy changes – including the National Living Wage (NLW) and the Apprenticeship Levy – will hit businesses to the tune of £9 billion per year by 2020-21; totalling £29 billion during the course of this Parliament.

In its submission ahead of the Budget 2016, the CBI has called on Chancellor, George Osborne not to increase this “cumulative burden” on business further, and instead pleads for a combination of targeted steps to back British businesses and support their growth ambitions.

Carolyn Fairbairn, director-general, CBI, said: “A spate of recent Government policies, including the National Living Wage and the Apprenticeship Levy, will cost the economy around £9 billion a year by 2020.

“The UK needs to be able to grow its way out of the deficit, but the danger of this rising policy burden is that it holds back businesses, particularly smaller firms.

“This cost burden has now crept up far enough, if the Government is serious about supporting the UK’s companies to drive growth in the economy.

“In this Budget, businesses will want to see the Government updating the UK’s business rates system, supporting investment through the capital allowance system and equipping our world-class innovators with the tools they need to compete globally.”

Within its submission, the CBI has recommended a host of ideas to boost business productivity:

• Solve the UK’s outdated Business Rates regime by switching the uprating of the tax rate from RPI to CPI, more frequent revaluations and taking the smallest businesses out of the tax altogether.

• Lay out a clear roadmap for energy policy by simplifying energy efficiency taxes; cementing the future of the Carbon Price Floor and providing clarity on the Levy Control Framework to encourage investment in low-carbon energy.

• Supporting investment through increasing the scope of capital allowances and keeping the UK competitive on interest deductions for Corporation Tax.

• Driving forward business innovation by broadening access to existing research and development incentives and cutting the cost of recruitment of high-skilled employees for smaller innovators through a payroll incentive.

Guaranteeing stability for businesses and employees alike by maintaining up-front National Insurance Contribution tax relief on pensions and marginal rate relief for middle-earning families. CBI believes the removal of these would be a false economy, harming pension saving and maximising the government’s fiscal load in the years to come.

Last updated: 16th February 2016