Britain risks being caught in a vicious circle of low growth and high taxation unless the government takes radical steps to increase investment, raise competencies, cut bureaucracy and seize the opportunities of the green economy, warns a leading business lobby group.
Tony Danker, the director general of the CBI, will use a speech on Thursday to criticize ministers for lack of ambition, as he outlines a five-point plan to restore Britain’s underlying growth rate to pre-financial crisis levels in 2007-09.
In an echo of arguments put forward by Labor leader Keir Starmer on the Prime Minister’s question on Wednesday, Danker will say ministers need to be bolder if Britain is to cope with rising spending pressures due to an aging population.
“The current settlement does not work. There is increasing spending pressure; too much tax; and too little growth,” he will say. “We are trapped.”
In a speech at an event co-organized by the CBI and a right-wing think tank, the Center for Political Studies, Danker will point to forecasts from the independent Office of Budgetary Responsibility, which show that the economy is growing at an annual rate of between 1.3-1 , 7% when it had recovered from the pandemic.
“For a country accustomed to growth of 2-2.5%, it is simply not good enough,” says the head of the organization. “And what’s really worrying is that the government has accepted the forecast as the goal. Everything the government is currently trying to accelerate growth is just achieving a new normal with low growth.
“But to the government, I say that this is not a time when we are lowering our ambitions, that we are content with a new normal with low growth. After a disappointing economic decade earlier, this is our second chance.”
Danker wants to emphasize that he is not talking about growth at any cost, but sustainable long-term growth as a result of higher investment, innovation and productivity.
The CBI’s five-point plan for faster growth involves:
A permanent tax deduction of 100% for capital expenditures to increase investment when the Treasury’s 130% “super deduction” ends in March 2023.
Replacing the apprenticeship tax with a competency challenge fund so that the UK matches the European average skills investment.
Doubling green growth by to close the public investment gap with competing countries on the transition to a net-zero model. The CBI says an extra £ 3 billion a year is needed to retrofit homes to make them more energy efficient.
Establishment of a future regulation office to support a post-Brexit regulatory framework that is flexible and dynamic and focused on future needs.
Establish an independent council for future skills to match training with future economic demand and recommend where visas for international skills are needed to overcome shortages of home-grown talent.
Danker will say he accepts that the government is in a difficult situation after accumulating a record high peacetime budget deficit during the pandemic. “They say we can not afford to spend more on growth. But I say we can not afford not to. In short, we will not pay down today’s debt, expand public services and reduce taxes by 1.6%. “
At current levels, taxes as a share of the economy will return to levels last seen when Clement Attlee was the post-war Labor prime minister in the early 1950s.
“Today’s high consumption, high taxes and low growth are a vicious circle that is hard to break,” says Danker.
“Meeting the needs of an aging population in the coming years will put even more pressure on public money. According to our calculations, by 2030 we may have to find an additional £ 40-50 billion. per year to cover the cost of an aging society, and more than double that by the middle of the next decade. “