Tax cuts to boost UK economy: Business chiefs desperate for government as Tory leadership battle begins

Business leaders yesterday called on Boris Johnson’s successor at Number 10 Downing Street to reduce Britain’s huge tax burden and revive the economy.

The head of the CBI said recovery must be a “main focus”, while Cobra Beer boss Lord Bilimoria said businesses were “desperate for leadership” and focused on growth and investment.

But some economists believe that such a stimulus could add fuel to the inflationary fire, forcing the Bank of England to raise interest rates more sharply.

Tax statement: CBI chief says recovery must be ‘top priority’ and Cobra Beer boss Lord Billimoria says businesses ‘desperate for leadership’

The upheaval in Westminster came as the government’s budget watchdog, the Office for Budget Responsibility, warned that national debt could spiral out of control and more than triple over the next 50 years if ministers do not raise taxes further or cut expenses.

The prime minister said in his resignation speech that his successor must be “equally committed to reducing the burden on businesses and families and, yes, cutting taxes”.

However, his former chancellor Rishi Sunak’s policies to raise corporate tax from 19 per cent to 25 per cent, freeze income tax thresholds and increase national insurance means the overall income tax burden will rise to its highest level since the late 1940s.

Nadhim Zahavi, who replaced Sunak, expressed his opinion on scrapping the corporation tax increase planned for April next year, saying: “Nothing has been decided.”

Bilimoria told the BBC: “We need to reduce taxes.

“We have the highest tax burden in 70 years, and that’s absolutely wrong at this time — any time, let alone a time when businesses need help and consumers need help.

“Business is desperate for leadership, calling on the government to focus on growth, focus on investment.”

Heavy Burden: Former Chancellor Rishi Sunak

Heavy Burden: Former Chancellor Rishi Sunak

Brexit supporter John Longworth, a former head of the British Chambers of Commerce who now heads a network representing family businesses, said firms were “desperately frustrated by the government’s lack of economic policy”.

He added: “They have not taken advantage of Brexit in any way. Where’s the deregulation, where’s the tax cut, where’s the cut in foreign tariffs that we can do unilaterally to lower the cost of living?”

CBI Director General Tony Danker said: “We need to fill the policy vacuum quickly to protect people’s living standards through action to boost business confidence, investment and growth.

“Reviving the economy should be the focus of all politicians.” Alex Baldock, chief executive of electrical goods retailer Currys, said: “The consumer needs help through the cost of living crisis.”

Paul Dales, chief UK economist at Capital Economics, said MPs fighting to succeed Johnson would have to promise tax cuts to win support.

It meant that the change in leadership “could lead to fiscal policy being a little looser and monetary policy a little tighter.”

Conservative MP and former minister David Davies said the next leader must stop the rise in corporation tax, reverse the recent rise in National Insurance, reverse the heavy-handed IR35 tax reforms and cut VAT on fuel to tackle the cost of living crisis.

He is also in favor of unfreezing the income tax threshold, which is pushing more and more people into the higher tax bracket.

Davies argued that Britain’s high tax burden was “a major contributor to its current economic difficulties” and rejected the OBR’s argument, which he said ignored the fact that boosting growth would provide a significant boost to tax receipts.

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