Shalini Raste – 03 3月, 2021 UK and Ireland Perspective

A low tax, high wage economy has long been the vision of the Conservative government. Yet the impact of the pandemic seems to have set the UK on a different path…

 

Whilst Rishi Sunak’s “Levelling up” policies aim to reward those who lent their votes to the Tories, has he stalled our international competitiveness at the same time?

“Levelling up” ambitions are addressed through a range of policies:

  • 8 New Freeports in England, 3 of which lie in traditional labour heartlands (Humber; Liverpool; and Teesside), aim to act as a catalyst for local regeneration

  • 750 jobs at the Treasury will be transferred to Darlington in the north-east of England – more of a symbolic statement to show devolution of power away from Westminster

  • The Towns Fund has received a further £1bn for an additional 45 struggling towns, over half of which are in the north of England

Although these policies will please the many, some look to set to reduce the UK’s international competitiveness, at a time when we need to “go global” most:

  • The proposal to raise UK Corporate Tax to 25% by 2023 is likely to make the UK a far less attractive destination for investment.

  • The Chancellor’s plans to freeze income tax thresholds looks set to put more than 1.3 million people into paying income tax and a million more into the higher rate band. Factoring in inflation, employers may well need to pay higher salaries to compensate what looks set to become a high tax economy. Not the most attractive prospect for business.

  • An unusual temporary tax relief on investment in capital assets aims to incentivise companies to spend now and save later. But with no visibility on exactly when and how pandemic lifestyles will end, this is a risky time to be asking any business to spend.

The Brexit deal nearly stalled on the EU’s fear of a low tax, low regulation neighbour. It needn’t have worried. What couldn’t be accomplished by four years of level playing field negotiations has been sealed by four months of cash-guzzling lockdown. In the short term, at least, big-business looks set to foot the bill.

Yet Johnson’s vision of UK as the Singapore of the Europe may still be realised, with incentives for the green economy, including a new Green Glit; further investment in the new Future Fund which aims to support the scale up of the most innovative, R&D-intensive businesses; and a new fast-track visa aimed at attracting the most highly skilled migrants. Rather than Manufacturing Powerhouse it used to be, Johnson and Sunak seem set on turning the UK into a tech focused, green enabled, scientific powerhouse. Maybe our Mexicoke loving Chancellor has found the sugar rush needed to energize our stalling economy.