Business will be the judge on whether Andy Burnham can “regain stability”
If Andy Burnham is serious about being a friend to business he should commit to no new business taxes, says Alan Vallance
When every new government begins – and there have been a few in recent years – the goodwill they start with is already a diminishing return. Businesses understand that no Prime Minister can transform the economy overnight, but they do look for early signals about the direction of travel. Those first decisions shape whether firms believe they can plan and invest with confidence.
One of the privileges of leading ICAEW is hearing directly from chartered accountants who advise businesses every day. They have a unique perspective on the economy because they see investment decisions being made in real time, and they understand better than most what gives businesses the confidence to make them. Our members work with businesses of every size, in every sector and every postcode of the UK, and they share the government’s desire to see stronger growth and thriving local economies.
Andy Burnham has made clear that he wants to lead a government that is a “friend to business”. That is an ambition ICAEW welcomes.
Certainty drives investment
British businesses have not lost hope, but after several years of economic uncertainty they have become more cautious about committing capital and planning for the long term. Our latest Business Confidence Monitor reflects that mood, with sentiment declining further into negative territory as global uncertainty weighed on investment decisions. Businesses are resilient, but this should not be mistaken for confidence.
An early opportunity for the new government to demonstrate that intent would be to provide greater certainty around business taxation, as repeated changes have taken a cumulative toll on confidence. Businesses can adapt to higher costs when they understand them, but uncertainty makes long-term investment much harder. An early commitment to no further business tax rises would therefore send a powerful signal that the government wants firms to plan beyond the next fiscal event.
The same principle applies to regulation. Over many years successive governments have layered new rules and reporting requirements onto an already-complicated system. The result is a growing administrative burden that diverts time and resources away from innovation, customers and expansion. Simplification is not about lowering standards; it is about allowing businesses to focus on growth rather than bureaucracy.
Backing the government’s growth ambitions
There is every reason to believe this government can build a constructive partnership with business and there are encouraging signs that such a partnership is possible. Our latest member survey suggests businesses are prepared to back many of the government’s ambitions: 40 per cent of ICAEW members polled believe plans to regenerate towns, improve infrastructure and stimulate local economies would have a positive impact on their organisation, while more than a third see skills and workforce development as a priority for the new administration.
That support should not be underestimated. It demonstrates that businesses want the government’s growth agenda to succeed because they understand the benefits it could bring to communities, employers and the wider economy. Still, they are equally clear about what must underpin that ambition. Three in five (57 per cent) of the members we asked say addressing the tax burden on business should be the government’s top priority, while 43 per cent point to the growing weight of regulation as an issue that needs tackling in the first 100 days.
Reset the relationship with business and go forward
The encouraging message for the new Prime Minister is that businesses are not looking for reasons to say no. They support many of the government’s ambitions, from regional investment to improving skills, because they recognise that stronger local economies benefit everyone.
What they are looking for is confidence that those ambitions will be underpinned by a stable tax system, proportionate regulation and a government that understands how investment decisions are made. If ministers can provide that certainty, businesses will do the rest.
The opportunity facing Andy Burnham, John Healey at the Treasury, Jonny Reynolds in Business, and the entire Cabinet, is not simply to describe Britain as pro-business, but to make it feel that way.
If this government can give firms the confidence to invest for the long term, they will respond and economic growth will follow.
Alan Vallance is the Chief Executive of the Institute of Chartered Accountants (ICAEW)