Sir Martin Sorrell: Tax hikes risk hurting UK productivity
The government’s potential tax hikes and changes to investment relief could drive capital abroad, discourage hiring and stymie productivity, former WPP chief Sir Martin Sorrell has warned ahead of tomorrow’s Autumn Statement.
“We have a productivity problem and a growth problem, which derives from the productivity issue,” Sorrell told City PM.
He added that, although the Budget will ease uncertainty and that some pain may be necessary, the government must tread carefully to avoid damaging already sluggish productivity levels.
“I think this government has very little wiggle room but the question is how do they implement these things in a way that encourages growth, encourages people to invest for productivity and encourages people to employ people.
“Some of the things that have been floated will have the opposite effect.”
Sorrell warns over tax hikes
Concerns over a potential capital gains tax (CGT) hike are high, with investors bracing for an increase on the current 20 per cent rate for share sales when Chancellor Rachel Reeves takes to the despatch box on Wednesday afternoon.
Sorrell – now the chairman of S4 Capital – warned that any CGT hike must be properly indexed to account for holding periods. “If I’m treated the same for holding stock in a company for five or ten years as someone who holds it for five or ten minutes, that’s ludicrous,” he said.
Reports also suggest that Labour may push for a one to two percentage point increase in employer national insurance contributions (NIC), while lowering the income threshold at which businesses start paying.
HMRC projects that a two-point rise could bring in £18bn, but critics argue it would effectively serve as a ‘jobs tax’.
“If we’re going to have higher employer NIC that’s going to discourage companies from hiring more people,” Sorrell said.
Sorrell also took aim at the categorisation of “non-workers,” which some politicians have equated with shareholders and property owners.
There are people who invest, build businesses and create wealth and jobs, he explained.
“If the PM really believes that non-workers are people who own shares and property, we have a real problem,” he said.