IoD Budget response: Business rates reform not enough

Responding to the Chancellor of the Exchequer’s Budget Statement and Spending Review, the Institute of Director’s Chief Economist, Kitty Ussher, said:

“The crucial test for this Budget was whether it gave business the confidence to invest. The Chancellor’s business rates and R&D tax credit reforms are welcome but with hefty hikes in other taxation on the horizon, that may not be enough to convince business leaders to press go on their plans for growth.

“He had an opportunity to partially reverse his previous decisions on employment and profit taxes, made in tougher times, but he chose not to do so.  

“While promising a ‘skills revolution’, the actual measures that were announced, while welcome, felt piecemeal, and will not give business confidence that we have a coherent plan to prevent future labour shortages for our post-pandemic era outside the EU.”

The IoD Directors’ Economic Confidence Index for September showed that business confidence has deteriorated dramatically from a high in June-July 2021. The national insurance rise was a significant contributory factor in the sharp decline in this economic confidence. Over two thirds of our members (68%) oppose the rise in employers’ NI and three in ten said it will negatively affect hiring decisions.

As confirmed by the National Institute of Economic and Social Research (NIESR) last week, in a policy paper part-funded by the IoD, the national insurance rise will act as a dampener on investment that in the longer-run will reduce GDP. It will also hit hardest the labour-intensive sectors that suffered most from Covid.