Tory leader hopefuls should develop “serious and bold plans for growth” and drop tax cuts that are “doomed to fail”, UK businesses have warned.
In an open letter to candidates launching their leadership bids to become the next prime minister, Confederation of British Industry (CBI) director general Tony Danker urged them to “develop serious, credible and bold plans for growth”.
“We are currently set for just 1% growth in 2023 and to continue to languish at the bottom of the G7 table on business investment. It won’t take much to tip us into a recession and were that to pass it would prolong the cost of living crisis,” he warned.
The business group also said that tax changes must trigger business investment, not fuel inflation.
“Growth that relies on only government or household consumption is doomed to fail, especially at a time of rising inflation and high debt,” Danker said.
Almost all candidates vying to become the new prime minister have made pledges to cut taxes.
Nadhim Zahawi announced tax policies that would cost an estimated £50bn ($59.3bn) a year. Sajid Javid, the former health secretary, who also served as chancellor, launched his leadership bid with tax cuts he said would cost around £40bn a year.
Rishi Sunak launched his leadership bid by warning Tories not to buy into fairytales.
"We need to have a grown-up conversation about the central policy question that all candidates have to answer in this election. Do you have a credible plan to protect our economy and get it growing?
"It is not credible to promise lots more spending and lower taxes."
Danker insisted tax changes that address “our nation’s longstanding poor performance on business investment” must be the priority, such as a permanent successor to the super deduction tax that ends next April, an urgent reform of the business rates system and a revision of the timing and rate of the planned corporation tax rise.
He stressed that while the corporation tax hike should be “revisited” given the wider weakening economy, leadership candidates should look at the UK’s entire business tax regime as a whole.
“Investment-targeted business tax measures avoid significant inflation risk as they seek to materialise into economic activity over the year ahead and beyond, rather than right now in the midst of inflation,” Danker wrote.
“They ensure that any downturn we face is short and shallow and that inflation-driven pay rises are replaced by sustainable, productivity driven ones.”
The CBI told the would-be prime ministers that long-term growth ambitions are vital.
“Sustainable economic growth must be at the heart of your manifestos. Without it, leadership ambitions cannot be met nor those of the British people and businesses,” Danker wrote in his letter.