Bad news for fans of economic growth this week as the US-based Tax Foundation releases their International Tax Competitiveness Index, which ranks 38 OECD countries on how pro-growth their tax systems are. The UK ranks a shameful 30th place, now lagging behind the likes of Hungary (7th), Czechia (8th), and even Germany (15th). So much for lofty promises of making Britain an “attractive” destination for investors…
Since 2021, our corporate tax competitiveness has nosedived 18 places, thanks to Sunak hiking it to 25% – a rate that’s set to stay. Things are poised to get worse, with the Tax Foundation and Centre for Policy Studies sounding the alarm that Reeves’ upcoming budget could see the UK tumble even further down the rankings to 35th place if hikes in capital gains tax, dividend tax, or the dreaded wealth tax materialise. Just four spots from the bottom, alongside France, Italy, and Colombia. Hardly a prelude to growth…
Daniel Herring of the CPS warned:
“In short, there is a real danger that we could end up with the least competitive and most anti-growth tax system in the OECD. The UK’s ranking shows that the way we raise tax is damaging incentives, getting in the way of innovation and undercutting productivity.”
Right on the money…
Meanwhile, capital is already streaming out of the country, and businesses are fleeing in droves. These latest figures aren’t the siren calls that will bring investors flocking…
Starmer might be plotting a ‘reset’ in UK-EU relations, but top economists are sounding the alarm, urging him to reject the siren calls to rejoin the EU, Single Market, or Customs Union. The real key to growth is in harnessing the benefits of Brexit: redefining regulations and strike better trade deals outside the bloc…
A report from the Centre for Policy Studies today notes that strengthening ties with Brussels is far from the solution to the UK’s growth challenges. Despite this, Starmer said he wants to negotiate an agri-food agreement with the EU to ease border checks, a move that would inevitably require alignment with EU rules, as well as abolishing the decades-old European Scrutiny Committee. Meanwhile, while the Euro area remains the main source of weakness in manufacturing as the UK surges, and UK’s GDP is expected to grow by 07.% in Q2, while the Eurozone only grew by 0.3%. If Labour is truly “pro-growth,” Starmer would be wise to remember the EU isn’t where he’ll find it…
The ‘plotters’ may have thrown in the towel on their bid to knife Rishi, though Robert Jenrick clearly hasn’t. He’s touring the media today to make Sunak’s life as difficult as possible, with a 115 page report titled “Taking Back Control” for the Centre for Policy Studies blasting the government’s handling of immigration and the “incapable” Home Office. One way to upset his former friend James Cleverly…
Canning liberal migration rules such as the graduate route and capping health and care visas are among thirty helpful suggestions for what the Tories should be doing to control borders. Co-conspirators will wonder whether ’Robert Generic’ is still scorned he missed out on Home Secretary…
In the event he runs for leader, it’s clear what his key campaign issue will be. Sunak’s commitment on Rwanda flights under even more pressure…
UPDATE: Jenrick has put out a punchy enough video on this…
The regulatory burden hitting businesses in the UK has risen by a whopping £6 billion a year under the Tories, according to a report by the Centre for Policy Studies. The equivalent of a 2p increase in corporation tax…
Despite cries from the Tories of being the party for business – a core Tory value – they’ve done little to promote them. Sunak announced an increased corporation tax from 19% to 25% in 2021. And now, despite assurances to cut red tape – much of what Brexit promised – the report points to more than 3,500 pieces of legislation over almost a decade that weigh down enterprises. Ten years to save British businesses?
Westminster’s eyes are moving onto housing as the election gets closer. While Gove waves the flag for his leasehold reform, the Centre for Policy Studies has been busy calculating how badly we’ve been doing on housbuilding in recent years. Now that net migration is at 1.1% of the population, a population equivalent to the city of Birmingham has arrived to the UK in the last two years. The housebuilding target for England remains set at 300,000 homes per year with an assumption of net migration at 170,500. At least the government have blown one figure out of the water…
The CPS has calculated England should be building 515,000 homes annually, 73% higher than the official target, and that we’ve underbuilt over the last decade by around 1.3 million homes. Meanwhile, the Adam Smith Institute has commissioned polling from JL Partners which manages to tease some support for building on greenbelt land out of the public. They’ve worked out that a policy in which a proportion of the profits from development from greenbelt land “goes back to the community” in some form has net support both among the general public and mortgage holders. The 18-24 age range is most in support, though monetary or “community” compensation will be needed to convince the public to build meaningfully. Prizes to be won for whomever can think up the right housing scheme to offer voters…
Wonk world has reacted to Hunt’s Autumn Statement, the general consensus from the free market think tanks being that there’s a few positive announcements, though not enough to be excited about. Guido gives you the run down…
The Institute of Economic Affairs’ Mark Littlewood welcomes the NI cut and permanent full expensing, though cautions that there is far more work to be done to reduce the tax burden and decrease spending. He called the statement “a step in the right direction, not a leap”…
The Taxpayers’ Alliance called the statement a “mixed bag” of good and bad news. Chief executive John O’Connell said, “Cuts to taxes for businesses and workers will be warmly welcomed, but the fiscal drag of frozen thresholds means the UK is still on track for an even bigger tax burden by the end of this decade.” Not a huge cheer from the TPA…
The Growth Commission points out that “while the cut in National Insurance Contributions by 2 percentage points will add 0.6% to GDP per capita after 20 years, it needs to be borne in mind that the freezing of tax allowances had already cost 1.3% of GDP”. Co-chairman Douglas McWilliams says the measures “are falling short of getting us out of economic stagnation”.
The Centre for Policy Studies welcome the permanent full expensing, something they’ve been campaigning for for many years. However, they warn against the decision to maintain the triple lock which “prioritises older people at the expense of younger workers”. Robert Colvile, CPS Director, cautioned: “The economy, and our long-term growth prospects, are still far from where they need to be.” Still much work to be done…
The Adam Smith Institute‘s Maxwell Marlow says “there is much to be positive about this statement“, praising the announcement of “a number of pro-business measures”. Though he cautions that Hunt will still need to “plan for public spending restraint”. The invisible hand will do its work…
The campaigners over at Stop the Taxi Tax say that Hunt’s pledge to consult on the 20% non-Black cab taxi VAT is “good news, but there’s no time to waste to stop this damaging tax“.
Director of Onward, Sebastian Payne welcomed the measures, saying, “Today’s Autumn Statement showed the best of moderate conservatism – combining bold measures to boost growth and slash taxes, with support for struggling workers and families.” Optimistic tone from the wets…
Douglas McWilliams, Co-Chairman of the Growth Commission says
“… there was little acknowledgement of just how high the public spending bill now is – and the impact such a large state has on the prospects for economic growth. My overall sense of this statement is that the Chancellor has taken a loaf of bread from the taxpayer and given us back a couple of slices.”
Not a full return to tax-cutting Tories…
