6 February 2017

  |  CBI Press Team


Prioritise stability at Budget to lock in productivity growth and future UK prosperity

The Government must back businesses’ growth ambitions in order to build greater prosperity across the UK, according to the CBI’s Budget submission letter.

The Government must back businesses’ growth ambitions in order to build greater prosperity across the UK, according to the CBI’s Budget submission letter.

Read our letter to the Chancellor

With firms facing heightened economic uncertainty in 2017, Britain’s largest business group has said that the Government must work in partnership with firms to prioritise stability.

The CBI welcomes the Chancellor’s move to one major fiscal event a year and looks forward to working with the Government on the details of its modern Industrial Strategy.  To bolster the UK’s productivity over the long term, a focus on education and skills, is the key to improving people’s life chances across the whole country.

Business priorities in the CBI’s Budget submission include: 

  • Committing to a funding plan for high-value technical education reforms for 16-18 year olds, as recommended by the Government’s independent Lord Sainsbury review
  • Build on the success of the R&D tax credit schemes by increasing the clarity, certainty and simplicity around claims, and introducing a supercharged credit for pre-commercialisation activity to build on our research strengths
  • Tackling the UK’s outdated Business Rates regime, by bringing forward the switch from Retail Price Index (RPI) to Consumer Price Index (CPI) uprating to 2018/19.

The CBI letter also calls on the Government to make sure it doesn’t add to the mounting burden of costs facing firms for just doing business.

Rain Newton-Smith, CBI Chief Economist, said:

“Prioritising stability will inject further confidence in the economy now, and help boost the country’s productivity and prosperity for the future. 

“While the economy has proved resilient, inflation is rising and growth is set to slow. As uncertainty around the manner of our EU exit dampens investment and higher inflation erodes consumer spending growth, the Government must show that it is serious about supporting companies to invest, to help our regions and nations prosper.

“The Government’s Industrial Strategy provides a significant opportunity to build a long-term modern economy as the foundation for a prosperous, fairer and more inclusive society. 

“At this Budget, businesses will be interested to see how the National Productivity Investment Fund announced at last year will be spent and by when.  Alongside this, they will be listening for more information on business rates reform and the Government’s plans to increase educational attainment”.

The CBI's Budget proposals in more detail 

The CBI is calling for action in three areas: supporting firms in a more challenging and uncertain economic environment, improving the attractiveness of the UK as a place to do business, and focusing on education and skills to boost regional growth and productivity.

1. Helping businesses to succeed today in a time of heightened economic uncertainty

While the economy has been resilient in the months since the EU referendum, many firms are concerned about the increased inflationary pressures facing their businesses in the coming months.

This is dampening investment and comes at a time when many companies are struggling to adjust to upcoming increases in the National Living Wage and the introduction of the Apprenticeship Levy, alongside other substantial and increasing administrative costs, and rising business rates bills.

Rain Newton-Smith, CBI Chief Economist, said:

“In a more challenging economic environment, the Government must be careful not to put further pressure on firms.

“Top of list for the high street and our manufacturers is for the Government to tackle the UK’s outdated business rates system, as this seriously risks impairing their ability to deliver the jobs and investment in our economy.”

CBI recommendations include:

  • Clarify the long-term intentions for financial services taxation, including a commitment to stability in Insurance Premium Tax for the rest of the Parliament
  • Open a review into the scope and effectiveness of capital allowances
  • Take immediate action to underpin stability in firms’ Defined Benefit pensions
  • Freeze the remaining long-haul band of Air Passenger Duty to support exports and inward investment.

2. Improve the attractiveness of the UK as place to do business

The UK already ranks highly internationally as an attractive place to do business and firms have welcomed the Government’s commitment to developing a modern Industrial Strategy.

Businesses also want the Government to use its reviews into R&D tax credit and Levy Control Framework to enhance the UK’s international competitiveness.

CBI recommendations include:

  • Provide greater detail on how the National Productivity Investment Fund will be spent, including the £2 billion on R&D, and make the best use of existing facilities like Innovate UK
  • Prioritise delivery of the planned local and digital infrastructure projects, providing timelines for delivery where possible           
  • Commit to stability in Insurance Premium Tax (IPT) for the rest of the Parliament
  • Provide a long-term, stable, transparent and cost-efficient framework for energy policy.

Rain Newton-Smith, CBI Chief Economist, said:

“Our inventors, makers and designers are concerned that the UK is currently too much of an innovation follower rather than a leader in the global economy.

“The R&D tax credit system already has strong support and forms an essential part of the UK’s innovation ecosystem. 

“The Government should use their current review into the tax environment for innovation to help smaller firms make the most of the system more easily.”

3. Boosting regional growth and productivity through education and skills

The CBI’s Unlocking Regional Growth report, published in December 2016, found that where children get their best GCSE results and school performance is highest, so is regional productivity.  Ensuring strong school performance is a shared challenge for the Government and business and is vital to boosting regional growth, productivity and enhancing life chances across all sections of our communities.

CBI education recommendations include:

  • Incentivise STEM students to become teachers by offering grants linked to joining the profession
  • Fund pupils’ core digital skills development
  • Introduce dedicated careers leaders in every school
  • Boost funding for Opportunity Areas to improve social mobility, particularly in rural and coastal areas
  • Consider a leadership investment fund for head teachers and support high quality teaching through the Chartered College of Teaching
  • Treat the first two years of the apprenticeship levy as a transition period while delivering a genuinely employer-led system
  • Government should protect education spending in real terms for every year of this Parliament, which will help ensure that the National Funding Formula is used to create a fair basis of funding in England.

Neil Carberry, CBI Director for People and Skills policy, said:

“We know that improving schools is the best long-term growth strategy a nation can have. While in many areas schools have made impressive improvements in recent years, too many regions are left behind and too many young people still don’t get the education they need. 

“Supporting better teaching and school leadership is the main way we can tackle this, underpinned by training investment and an accountability system based on more than just average exam results. But there is even more that businesses and the Government can do in partnership, and firms are ready to take on this challenge.

“Funding for effective delivery of high quality technical education is essential for our future competitiveness.  Alongside this, careers leader in every school and targeted action in key places through the Opportunity Areas scheme will build a platform for deeper co-operation between education and companies. 

“Raising young people’s aspirations has to be one of our top priorities, opening their eyes to a world of possibilities and ultimately underpinning the UK’s future economic fortunes.”