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High and unstable corporate taxes are damaging the prospects for Britain as a place to do business, according to Richard Lambert, director-general of the CBI
In his first big speech since becoming head of the employers’ organisation, Mr Lambert said the tax system was distorting and discouraging economic activity. The UK was slipping down the league table of international competitiveness and unemployment would rise if the trend were not reversed.
Concern about the issue was now high on the board agenda of many big companies, he told an audience of politicians, business executives and policymakers at the Social Market Foundation, a think-tank.
“We need an urgent and high-level debate with the Treasury on this matter, which has far too long been the Cinderella of our economic policy,” he said.
Mr Lambert said finance ministers tended to view companies as “highly effective tax-raising machines . . . they swing very few votes and taxes on business can be made to seem invisible and costless to the public.
“In a world where capital can flow from high tax to low tax economies, the burden of heavy corporate tax is not just born by shareholders, a large proportion of whom represent pensioners anyway. They are also felt by customers, suppliers and particularly by employees. High business taxes cost jobs and hold down wages.”
He appeared to endorse the tax policy set out by David Cameron, the Conservative leader, of sharing the fruits of economic growth between lower taxes and better public services. Mr Lambert said he wanted a society where “continued growth will have increased tax revenues while reducing the size of the government as a share of the state”.
Opinion polls showed only 21 per cent of the public agreed with the idea that the profits of large companies helped to make things better for everyone who used their products and services, down from almost 60 per cent in the late 1970s. Just more than 50 per cent now disagreed with the proposition.
Too few politicians and policymakers recognised the role of business in creating a successful society, he said. The erosion of trust had made the private sector an easy target for regulation and taxation, but this added to costs and reduced investment. It had also made it harder to involve business in public services such as health and education.
Companies had become more accountable and transparent, privatisation had improved “the old state-owned juggernauts”, and corporate responsibility was now a mainstream activity in communities across the country. But globalisation had led companies to re-structure in ways that had loosened the ties between business and society.
It had also raised the pay of senior executives who operated in international markets while depressing pay for unskilled staff. Combined with the decline of final salary pensions, this had jaundiced the public view of big business.
Companies must reach out to the schools “to open the eyes of young people to what business actually does and to excite them with its possibilities for the future”.