Sunak must nurture British business with fair taxes and smart reforms
London’s famous vibrancy has returned. City streets once again teem with activity, pent up for so long but now unleashed. Yet it would be a mistake to assume the journey ahead is an easy one. London – like the rest of the UK – stands at a crossroads. And the path we choose will decide more than just our immediate destination – it will define our journey for years to come.
Option one is easy; it’s the path back to where we came from. It leads us from the wilderness of the past 18 months, and delivers life as it was pre-pandemic. Given the challenges of the past year, it is a tempting choice. But it would be wrong.
Because pre-pandemic life also came with its own challenges. From stagnant productivity and flatlining growth, to unobtainable property prices and some of the highest deprivation levels in Europe.
The second path represents the better choice. It promises a challenging – yet exciting – journey, with an altogether brighter destination. A future rich in hope and innovation, in which both Londoners and non-Londoners feel invested in their capital.
In the coming weeks, the Government will set the trajectory. But the message from business is clear: point us in the right direction, and trust British industry to apply the throttle.
This begins with urgent action to address labour shortages and supply chain challenges, such as HGV drivers and CO2 production. It will take time to marry long-term skills training to business needs, so using the Shortage Occupation List to ease pinch points in the short-term is vital.
And with the energy crisis dominating headlines, a lasting solution, created in partnership with industry, is essential to restore stability.
With winter fast approaching, it is crucial to ensure support for vulnerable customers and energy intensive companies which underpin critical supply chains.
Elsewhere, forthcoming tax increases, including National Insurance, dividends and corporation taxes, mean the country’s tax burden will rise to its highest in 70 years. So London’s businesses will hope the Chancellor uses the Comprehensive Spending Review and Budget to enable businesses to meet ambitions for economic recovery, global competitiveness, and decarbonisation.
Creating a tax system which rewards investment is imperative. Reforming archaic and unfair business rates – London property taxes are the highest in the UK – while providing incentives for firms investing in research, innovation and green technologies can spur ambition. And greater capital allowances beyond 2023 – building on the success of the super deduction – while front-loading the commitment to pump £22bn into domestic R&D initiatives will drive longer-term business investment.
Urgent action on skills should add flexibility to the apprenticeship levy, while evolving it to support lifelong learning. Reinventing job centres as skills hubs and supporting our world-beating universities will give individuals and firms the skills to thrive.
Smart infrastructure spending – both physical and digital – will provide confidence. Specifically, a long-term financing framework for TfL will keep employees moving and investors listening. Gigabit connectivity and sustainable airport expansion will keep the capital connected at home and abroad.
Cop26 is now weeks away. It must be used to reinforce the role of cities as international leaders in decarbonisation. Investment in London will boost UK supply chains – whether on bus electrification, retrofit or developing green skills.
Actions like these would be a catalyst for private finance driving forward our collective recovery. Business is ready to do just that. According to the Office for National Statistics, there is around £900bn of pent-up corporate reserves waiting to be invested by those firms who can. This is money with the potential to change lives, reshape communities, and revitalise whole economies – but it must be won.
Competitors around the globe have already begun reforming industry and regulation, future-proofing their economies to capitalise upon new opportunities in technology and sustainability.
Government must bet big on British business, by establishing a foundation which encourages investment, rather than stifles it. Now is the time for ambition and our capital city can lead the way.