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CBI Tells Tories to End Tax War and Prioritize UK’s Green Growth
(Bloomberg) -- The UK’s ruling Conservative party should stop fighting itself over tax and prioritize green growth, the head of a prominent business group will say Monday.
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Tony Danker, director general of the Confederation of British Industry, will argue that now is the “wrong time for a new Tory tax war,” and that the UK needs to catch up with international rivals with more investment in green energy.
“Our international competitors in Europe, Asia and the US are going hell for leather on green growth and getting firms investing,” Danker will say, according to an excerpt released ahead of the speech. “We are behind them now and seem to be hoping for the best.”
Chancellor of the Exchequer Jeremy Hunt has lifted taxes in a bid to repair the country’s fiscal credibility since taking over from Kwasi Kwarteng, whose mini-budget in September led to a sharp drop in the pound and UK gilts. Kwarteng had pledged a series of tax cuts alongside an expensive energy price support program, triggering market chaos that led to a Bank of England intervention.
Prime Minister Rishi Sunak, who replaced Liz Truss in the aftermath of the crisis, said Thursday that he wanted to cut taxes but had to control inflation first. Some Conservatives have attacked the higher tax rates as the UK suffers from a likely recession.
Net Zero
Speaking at University College London, CBI chief Danker will argue that Britain can boost growth without slashing the overall tax burden.
“The UK is falling behind rapidly – to the Americans and the Europeans, who are outspending and outsmarting us,” he will say. The UK is behind the Germans on heat-pumps, insulation and building retrofits, the French on EV charging infrastructure, and the US on operational carbon capture and storage projects, according to Danker. “We’re lagging all three on hydrogen funding. ”
Read More: Why Europe Is Fuming Over America’s Green Subsidies (QuickTake)
Britain is falling behind in green growth, according to a government-commissioned review by the Tory MP and former energy minister Chris Skidmore. Skidmore’s main argument, which was released in a report earlier this month, is that net zero is the “growth opportunity of the 21st century,” but that current inertia means the UK risks losing out on jobs and investment.
Danker will say that these findings are “devastating.” The CBI estimates that the UK will lose out an estimated £4.3 billion ($5.3 billion) of green growth market value in Europe by 2030.
Super-Deduction
He will also call for the corporation tax super-deduction, which is due to expire at the end of March, to be replaced. “With it, the UK had the fifth most competitive tax system in the OECD for capital investment. Without it, we’re back to 30th out of 38,” Danker will say.
The CBI expects business investment to fall this year, sending it 9% below pre-pandemic levels by the end of 2024. Across the UK, Danker will say he has spoken to firms which are putting their “investment plans on ice” to divert cash to energy, higher wage bills and higher tax rates.
Danker is proposing the government uses its tax system in a “smarter way”, by allowing full expensing for capital investment. “The government have said they believe in this policy but can’t afford it,” he will say. “That’s because they don’t want the hit to their annual accounts. I don’t think that’s good enough and nor do Britain’s investors. ”
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