Dear Chancellor, it's time to convince the country there is a long-term vision for the economy
Michael D M Izza, Chief Executive
| ICAEW
In a letter to the Chancellor, CEO of the Institute of Chartered Accountants in England & Wales urges Hammond to stick to his commitment to reach a budget surplus by 2025.
Dear Chancellor,
This Budget must convince the country there is a long-term vision for the economy. Government debt still equates to £130,000 per household – an enormous public liability. As it stands, the Government is leaving a trail of unsustainable debt and if we do not get our spending and borrowing under control this will have the greatest impact on the next generation.
Stick to your commitment to reach a budget surplus by 2025
Average net national debt is expected to grow to £2 trillion in the next five years and the level of public indebtedness is the highest since the aftermath of the Second World War. As you explore measures to tackle intergenerational fairness we believe the solutions must operate within the budget rules that you set out in your first Budget – or we risk extending this to a five Parliament problem.
We would warmly welcome a focus on long-term strategies, including anticipating a likely increase in the costs of government borrowing. The last time the Debt Management Office published a strategy was 1995. Much has changed in the world since then, so a new approach is overdue and it must take into account the vulnerability of swapping long-term finances debt with short-term variable debt.
Tackle regulation and tax complexity to ensure the UK remains competitive post Brexit
The complexity of our current tax code undermines confidence, acts as a regulatory burden on business, suppresses entrepreneurial spirit and inhibits economic growth. Changes at this Budget should be kept to a minimum while attention is given to ensuring a successful roll-out of Making Tax Digital and making the necessary changes to accommodate Brexit.
Beyond Brexit, the UK has the opportunity to initiate a radical and comprehensive review of the tax system to make sure it works in the digital age. Our tax system has become too complicated, thereby increasing compliance costs and making it difficult to operate and administer. The accelerating spread of e-business models is undermining the traditional tax base and the rise of the ‘gig’ economy is making this look anachronistic. We need an informed debate about what is a fair balance between the taxes (including NIC and Apprenticeship Levy) paid by and for employees and those paid by the self-employed.
Encourage investment in innovation to drive economic growth
Businesses are cash rich and we recommend that you take the opportunity to inject optimism into our slowing economy through the new industrial strategy. Despite the lack of certainty on Brexit, the economic conditions for capital investment remain positive and this should help drive growth. But currently, businesses are conspicuously reluctant to make major capital investments; they must again see good reason to invest in technology, training and development, as well as new products and services.
The UK excels at providing funding for already profitable companies or proven technology, yet when it comes to innovative SMEs that need cash up-front – whether that is pioneering medicines or ground-breaking engineering – there is a serious gap. The Government consultation on financing growth in innovative firms is a step in the right direction but this must now translate into radical action.
Businesses are bracing themselves for trading after Brexit, which might include the reintroduction of tariffs although this is clearly subject to the result of further negotiations. Our future competitive advantage will lie in our ability to produce – and fund – world-beating products. Tax relief alone will not be sufficient to support firms. Britain has a strong scientific base, so grant money will be necessary to take new ideas from universities and into production. We need to encourage investment in high-risk businesses, because that is where innovation lies.
I would welcome the opportunity to discuss this in more detail.
Yours sincerely,
Michael D M Izza
Chief Executive
PoliticsHome Newsletters
Get the inside track on what MPs and Peers are talking about. Sign up to The House's morning email for the latest insight and reaction from Parliamentarians, policy-makers and organisations.
