To break out of the vicious cycle of tax increases and weak economic growth, it is vital that the Chancellor prioritises investment at the upcoming Budget.
In her own words, investment is the lifeblood of growth. And growth is ultimately the key to sustainable public finances.
Our new report sets out five policy actions that could help do this. They’re based on our analysis of the economic data, and what we hear from businesses, professionals and individuals across the country.
We believe it’s vital to support investment in the UK economy through the pension system – not make it harder with less generous tax treatment like at the last Budget. Our calculations show that cutting higher-rate pension tax relief, for example, could mean £50 billion less in pension contributions over five years, working against positive proposed changes in the government’s Pension Schemes Bill.
We also urge the Chancellor to resist calls for a wealth tax. While it might sound simple, the evidence shows it could drive at least £100 billion into less productive assets, or out of the UK entirely.
Business taxes need a rethink too, including business rates and capital allowances. We show that more generous capital allowances could boost the economy by up to £60 billion.
Meanwhile, public investment could do much more. The report highlights the need for more of it to be directed outside London, and for action on high energy costs, which are holding businesses back. Planning reform is vital to help this happen.
Finally, taxes on property transactions have become a real barrier, not just for people wanting to move homes, but also for businesses trying to attract new talent, with high moving costs putting people off relocating for work. The government should look for ways to replace them, not increase them further.
If you want to know what these changes could mean for you and the UK, read our full report.
