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Business chief warns of backlash over corporation tax rises

·3-min read
Britain's Chancellor of the Exchequer Rishi Sunak attends a press conference inside the Downing Street Briefing Room in central London on September 7, 2021. - Breaking an election pledge not to raise taxes, British Prime Minister Boris Johnson on Tuesday announced hefty new funding to fix a social care crisis and a pandemic surge in hospital waiting lists. (Photo by TOBY MELVILLE / POOL / AFP) (Photo by TOBY MELVILLE/POOL/AFP via Getty Images)
UK chancellor Rishi Sunak is expected to raise the corporation tax rate from 19% to 25%. Photo: Toby Melville/POOL/AFP via Getty

As taxpayers digest news of the planned national insurance increase, the government is also facing a broader pushback on tax rises in the corporate sector. 

Tony Danker, head of the Confederation of British Industry (CBI), is set to say in a speech at the Alliance Manchester Business School later on Monday that the government risks taking the "easy option" by leaning on businesses to fund public spending. 

Danker is due to say he is "deeply worried" about the premise that taxing business will not impact growth and that "smarter taxation" is needed to push the UK forward. He is set to say the increase is "self-defeating."

Last week, the government proposed an increase on corporation tax from 19p to 25p. It also backed a raise in national insurance rates from 12% to 13.5% — almost a 10% increase overall for millions of taxpayers. These measures are tipped to raise £12bn ($16.6bn) to plug the health and social care spending black hole, and a total of £36bn over the next three years.  

Read more: Johnson announces NI and dividends rate rise of 1.25 percentage points to fund NHS and social care

"We’re at an inflexion point. Brexit, COVID, climate change — all demand that the UK forges a new growth story to compete in the world. And believe me this will be a competition — for new markets, new skills, and technological advantage," says Danker. 

The CBI boss lays out the idea that the current goal is to beat previous governments benchmarks, not those of the rest of the world, which could render the UK uncompetitive in a global landscape. 

Between 2021 and 2025, the UK government is projected to invest an average of 3.4% of GDP, compared to 3.9% in the US, 4.1% in Canada, 5.9% in Japan and 9.0% in China, according to Danker.

Turning to the skills shortage and labour market issues, the CBI has recommended investment in skills and development, utilising the system developed post-Brexit to solve the problems. 

Danker is set to say the "seismic reskilling challenge" for the next decade has already been identified —Some 90% of the workforce will need to learn new skills. "It will cost an additional £13bn a year simply to stop skills gaps worsening."

Read more: UK sets out £650bn infrastructure spend as supply chain crunch continues

Therefore the CBI is also calling for a reform of the apprenticeship levy as well as a rethink of corporate taxation. 

Earlier on Monday, in acknowledgement of a skills shortfall, the government set out a plan to pump £650bn ($897.8bn) into infrastructure, a move it hopes will support 425,000 jobs per year.

The latest Plan for Jobs progress update set out investment in infrastructure projects across the country over the next decade.

Some £350bn has already been spent on this since the pandemic began.

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