Joel Muckett 9 Nov 2017 10:45am

'Robot tax' would suppress growth, says report

Labour Party leader Jeremy Corbyn’s proposal for a tax on robots is expected to suppress productivity growth, depress wage growth and push more jobs overseas

A report by the Centre for Policy Studies (CPS) said impeding mechanisation would be disadvantageous for Britain, adding that the nation’s problem was having “too few robots, not too many”.

At last month’s Labour Party conference Corbyn said robots and artificial intelligence were a “threat” to workers and he proposed an additional tax for businesses using robots to replace humans.

Microsoft founder Bill Gates also recently argued that robots should be taxed at the same level as the people they replace to help fund social services and education.

Figures from the CPS report, however, revealed that there were only 71 robots for every 10,000 employees in the UK manufacturing industry. In contrast, Germany had 300 robots for every 10,000 employees.

The low amount of robots reflected a “wider bias” towards labour over capital investment, contributing to productivity problems in the UK, the CPS said in a statement.

“Going ahead with a robot tax or other measures that would discourage investment in capital would be hugely damaging for the UK,” said the CPS’ head of economic research, Daniel Mahoney, who wrote the report.

“The UK already suffers from a low capital-labour ratio, which is dampening productivity growth and holding back wage increases. Corbyn’s plans would exacerbate this problem and simply encourage new technologies and economic activity to locate elsewhere.”

The report also looked at the impact that automation could have on the job market, finding it to be “employment-neutral, at least in the medium term”.

It added that calls for a Universal Basic Income were premature as it would be “costly, distort the labour market and, in any case, income inequality has been falling”.

It was unlikely that mechanisation would cause net employment to fall, as Britain was less at risk than other developed nations, however the report warned that automation could trigger a growth in income inequality, adding that this could be countered by reforming skills and training.

Head of ICAEW Tax Faculty Frank Haskew said it was “difficult” to see how a tax on automation could be effective and believed it could drive away potential investment.

“Investment in robots will be made to improve efficiency and productivity, areas where the UK lags behind many of our competitors. There has been broad consensus that the UK needs to invest more in infrastructure to improve productivity, so taxing robots would run counter to this,” he said.

Haskew also argued that reforming skills and training would not be enough to counter a growth in income inequality.

He added that improved efficiency from automation could also lead to lower tax revenues and shift “more of the tax burden on those in employment”.

“We will need to consider how best to address these questions and we need to think about them in advance and plan for them in the longer term, rather than make short term decisions that do not address the underlying problems,” he said.

Last month, the Confederation of British Industry (CBI) called a commission to examine how artificial intelligence (AI) would impact jobs in the UK.