Zero growth Britain? A wake up call to make our taxes competitive
Britain must invest in its own innovative enterprises if it wants to keep competing on the world stage, writes Lubov Chernukhin
Last week, the Organisation for Economic Co-operation and Development released its quarterly GDP growth statistics for the G20. In the UK, there was zero economic growth in the third quarter of this year. These findings are a wake-up call for Britain: our G20 counterparts saw on average 0.7 per cent growth in the same period. It must urgently become the national priority to close this gap, and in order to do so we need to drive major investment.
There are positive signs on the horizon: the Global Investment Summit in November was a resounding success, securing almost £30bn of private investment into the UK economy and creating 12,000 new jobs. The GIS stands as a major vote of confidence in the UK’s renewable energy, technology, infrastructure and housing sectors, and it is hard to see this as anything but a positive sign for the UK’s economic future.
While major investment summits generate the headlines that raise the profile of the UK as the place to do business, the efforts that truly create sustainable long-term growth can get lost amidst the statistics and announcements. While we should absolutely be proactive in attracting investment and promoting the UK, there is no greater draw for investment than the implementation of domestic economic policies that create an environment where business can thrive.
The recent Autumn Statement included many welcome changes, from reducing business rates for high streets and small businesses to the tune of £4.bn, to making full expensing permanent – all helping to protect and promote the growth of the businesses that make up the backbone of the British economy. Similarly, reducing the national insurance burden on 27m working people will put more money into the hands of British people and then back into our economy. This is a good start.
But we need to build an economy centred on competitive tax policies that attract investment and promote domestic growth all year round. For example, by lifting the burden of the so-called ‘tourist tax’, which is driving business away from the UK’s high streets, our economy would see an additional £3bn in spending annually – one simple measure that would reliably deliver ten per cent of the investment announced at this year’s GIS, every single year. Likewise, it is vital we build a policy framework that incentivises capital to come and stay here for generations, with the first step to achieving this being to abolish inheritance tax.
We must also better support and reward our SMEs. Britain’s 5.5m SME owners account for an impressive 52 per cent of the private sector’s annual turnover, accounting for a huge £2.18 trillion every year. Unlocking their full potential by creating the conditions where they can thrive, reinvest and grow should be at the very heart of the UK’s economic policy. SME owners ought to be able to take advantage of lower rates of tax on their dividends as well as business asset disposal relief, supporting their aspirations and ensuring that their hard work is rewarded.
Yet, despite their high share of the private sector’s turnover, SMEs only generate a quarter of the UK’s GDP, while government spending contributes an immense 45.6 per cent. As a result, our country has the lowest level of domestic investment in the G7 economy. By keeping more money on the balance sheets of SME owners, we can dramatically increase reinvestment into domestic business, which would grow the economy more efficiently than our current overreliance on government spending.
It is clear what is needed to drive real long-term growth – and move away from the shocking reality of zero growth Britain last quarter. Without economic planning that prioritises investment and growth through our innovative British enterprise, our economy will have a very hard time competing on the world stage.