Ahead of the Chancellor’s Autumn Statement, Grant Thornton UK LLP comments on the policies needed to create a vibrant economy, where businesses, communities and individuals can thrive.
The recommendations come days after the business and financial adviser published the results of its Vibrant Economy Index. The findings show that creating a country that works for all relies on more than simply focusing on headline economic prosperity.
Jonathan Riley, Head of Tax at Grant Thornton, commented:
“The Chancellor’s Autumn Statement is likely to focus on spending rather than tax giveaways, though we are expecting announcements around a continued freeze on fuel duty, cuts to Air Passenger Duty and subsidies for childcare aimed at struggling households. While spending on these policies and projects such as infrastructure is welcome, the Chancellor will need to remain prudent given an increasing borrowing black hole, and the risks posed to the economy by the UK’s exit from the European Union.
“Despite indications that any spending announcements will be careful, considered and targeted, we believe that there is room for measures that will help create a better environment for businesses, and a vibrant economy where communities and individuals can thrive.
“While there are suggestions that corporation tax should be cut below the planned reduction to 17% by 2020, the case is not proven. Businesses consistently report that stability and certainty in the tax regime are more important than additional cuts. Any measures to boost research and development as part of a new industrial strategy should not restrict access to the UK’s competitive R&D tax credit regime. Nor should any changes be part of the price that the government may need to pay in post Brexit trade negotiations.
“Spending on targeted infrastructure projects that will see spades in the ground and more emphasis on immediate infrastructure issues will help ensure that towns and cities in the UK do not suffer from third-rate road and rail connections. Equally important are nationwide measures to stimulate housebuilding. A chronic shortage of housing is affecting the livelihoods of the young, businesses are losing talent to other areas, and communities are struggling to retain low-paid workers who deliver essential services such as social care. The problem isn’t just about an increasing demand, but a shortage of supply, and measures need to be targeted at releasing land for development and getting Britain building again.
“The NHS is under significant service and financial pressure and future funding should be a priority for the government. While sustainability and transformation plans are being built, there is a lack of confidence as to whether they will deliver real change. In the short-term, additional funding is essential and over the longer-term, we need to look for ways to integrate health and social care, and ensure that primary services are resilient enough to avoid hospitals bearing the brunt of an ageing population.”
On tax and restoring trust in business, he added:
“Further cuts to corporation tax, which is already planned to fall from 20% to 17%, are not likely. While in some quarters this will be unpopular, the UK should not join the race to the bottom in terms of business tax. Restoring trust in businesses and institutions is fundamental to addressing some of the issues borne out in the recent Brexit vote.
“In recent years, we have seen a growing disquiet by the public over the approach adopted by some corporates to their approach to tax planning. Whilst some excessive and artificial activities cannot be condoned the sheer complexity of the UK tax regime is responsible for much confusion and being open to abuse. We have long called for wholesale tax simplification, and while changes are afoot, it requires political will to see through the adoption of recommendations from the Office of Tax Simplification. The Autumn Statement provides an opportunity to consider what we need from a tax regime, to raise the funds necessary for the society we want, without overburdening those who create wealth.”
We believe a vibrant economy is one that goes beyond financial returns and takes into account the wellbeing of society and everybody’s ability to thrive. Our Vibrant Economy Index not only considers prosperity, but also dynamism and opportunity; inclusion and equality; health, wellbeing and happiness; resilience and sustainability; and community, trust and belonging. Explore the index