Postpone tax rises: Budget must build a bridge to recovery

The Chancellor should focus on jobs and exports in the Budget next month and create a bridge through to economic recovery in the summer and beyond, Chartered Accountants have said.

Chartered accountancy body ICAEW said its members were clear that this was not the time to be making significant tax changes, and instead the Budget should be used to support businesses, help exporters, and get people back to work.

ICAEW will be writing to the Chancellor to ask him to take the views of its members into consideration as he finalises the Budget, which is set to take place on Wednesday 3 March.

ICAEW members, who advise more than three million businesses across the UK economy, were asked for their views on what measures could be contained in the Budget.

Three-quarters of respondents working in companies said they did not want to see any major corporate or personal tax changes, the survey found. One-third said extra taxation to repair the public finances should not come in until next year, while a quarter said it should not be until 2023.

Instead, just over half said the government should extend the existing business support schemes, which should act as a bridge to the summer and beyond. 

Jobs, exports, infrastructure

The Budget should focus on job creation, help SMEs who export, and drive the rollout of digital infrastructure to help the economy recover in 2021 and beyond, ICAEW members said.

It should include measures on employment and training to create new jobs and help those who need to re-skill. A third of ICAEW members said the Budget should also boost training in soft skills for workers who have lost their jobs.

Secondly, 31 per cent of members said there should be help for exporters to understand post-Brexit customs controls, particularly for smaller businesses that may not have the cash to pay for advice and for whom it may cost proportionately more to obey the new rules. This could include greater support about the options available through facilities such as customs warehousing.

Finally, 44 per cent of ICAEW members in the survey said the Budget should prioritise the roll-out of high-speed fibre optic infrastructure across the entire UK to support remote working, reduce gaps in internet coverage and boost a business recovery powered by adoption of new technology.

Iain Wright, ICAEW’s Director for Business & Industrial Strategy, said:

“Chartered Accountants want to see the Chancellor use this Budget to lay the foundations for the UK’s economic recovery.

“They recognise that public finances will need to be repaired. However, 2021 is not the right time for major changes to taxes: business is coping with COVID-19 and changes to our international trading relationships – it just can’t afford further disruption at such a precarious time in the economy.

“We want to see the Budget focus on providing that bridge to sustainable and resilient economic recovery, getting people back into work, help for exporters, and greater investment in digital technology to make our businesses competitive in the 21st century economy.”

Businesses still in distress

ICAEW’s members also said that many of the businesses they work with are still in distress as a result of the pandemic.

Members said that, assuming lockdown eased from March 2021, there were many businesses which were not confident they would have enough cash to survive for more than six months.

Many companies in retail, hospitality and leisure would not be able to make business rates payments in full after the rates holiday ends in March. The majority of companies in these sectors have received support through the various government schemes but they may still need further targeted help as they try and rebuild their businesses in a post COVID-19 world.

Finally, many businesses which were given local authority grants or government-backed loans thought that they would still need to borrow more in the future, highlighting that even when lockdown restrictions ease many businesses will need much more time to rebuild their business.