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27 Oct 2016 02:00pm

CBI publishes Autumn Statement proposals

The CBI has suggested a number of proposals to Philip Hammond as he prepares his first Autumn Statement as chancellor

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Caption: CBI urges Hammond to focus on investment, infrastructure and innovation

The business lobby group said the government should raise public sector net investment to 2% of GDP, rather than the 1.7% currently forecast, increasing average annual public investment by £6bn.

It said this increased investment should then be used to improve our transport and digital network, build more homes and extend regional funding.

The group also called for fast delivery of over £425bn worth of planned infrastructure investments with clear timeframes and implementation plans.

The chancellor should capitalise on the UK's core strengths, setting out a pro-enterprise agenda that instils confidence and kick starts investment

Carolyn Fairbairn, CBI director general

The CBI also proposed a number of measures it believes will keep the UK’s tax and regulation system competitive.

It recommended that the chancellor increase the annual investment allowance for businesses to £1m until the end of 2018 and remove new plant and machinery investments from business rate calculations in order to spur greater investment.

It called on the chancellor to bring forward the switch from Retail Price Index to Consumer Price Index uprating in business rates to 2017/18, to help address the rising burden on firms.

The group also recommended freezing the remaining long-haul band of Air Passenger Duty and carrying out a review of pensions regulation in order to address the issues that the low interest rate environment creates for firms operating Defined-Benefit pension schemes.

The CBI added that the UK needs a comprehensive industrial strategy that capitalises on the UK’s core economic strengths.

The group urged Hammond to double funding for Innovate UK and enhance the R&D tax credit system by 50% for firms not only researching, but developing new products here in the UK.

The group also called on the chancellor to commit publicly to a long-term target for R&D spending of 3% of GDP.

The CBI also recommended introducing a funding roadmap for replacing EU funds and grants.

Carolyn Fairbairn, CBI director general, said, "The chancellor should capitalise on the UK's core strengths, setting out a pro-enterprise agenda that instils confidence and kick starts investment.

"With huge variations in productivity between different parts of the country, the top priority must be to set out a programme that will get our regions firing on all cylinders and supports businesses to innovate, invest and create jobs in the years ahead.

"Amid economic uncertainty, it's important that the government does what it can to incentivise businesses to invest today, rather than postpone until tomorrow."

Fairbairn added, “A stable and competitive tax system is vital to the UK maintaining its international reputation as a great place to do business.

"To create stability, the chancellor should set a high bar for tax changes, focussing on targeted measures that address the current economic challenges: supporting investment and productivity growth.”

The business group also urged the chancellor to spend another £2bn per year on childcare in a bid to get more women into work.

Offering 15 hours per week of free childcare for all one to four-year-olds and extending statutory parental pay to 52 weeks would boost female employment by around 2%, the CBI said, adding that the move would almost pay for itself because of the extra taxes paid by those workers.

The CBI suggested that the chancellor should expand the controlling immigration fund to improve public confidence and build a new immigration system that addresses public concerns while respecting and welcoming the workers the UK needs.

The group argued that foreign workers help the UK to avoid skills shortages and help the economy to grow.

It also urged companies to do more to train up British workers, calling for a delay in the introduction of the apprenticeship levy so the government can work out how to make sure the tax then funds high-quality apprenticeships which “work effectively to improve skills and social mobility”.

The CBI’s proposals carry a total cost of around £11.5bn in 2017/18 (0.6% of GDP), falling to around £7bn by 2020/21 (0.3% of GDP).

The CBI said it supports the more flexible approach taken by the government not to achieve fiscal surplus by the end of this parliament – although the public finances should be balanced over the economic cycle.

ICAEW chief executive Michael Izza also wrote to the chancellor ahead of his first Autumn Statement calling on him to adopt a more commercial approach to the public finances.

Izza said that the government should take advantage of the low interest rates, Brexit and a change in the government fiscal rules on borrowing, to take investment decisions, in particular on infrastructure, which has the potential to generate growth and a positive return for taxpayers.

ICAEW also recommended that the government should have an industrial strategy in place, with support for successful sectors based on regularly evaluated performance and productivity targets.

Sinead Moore

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