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Budget: ICAEW calls for bold action to secure UK's future

Author: ICAEW Insights

Published: 22 Feb 2024

In the run-up to the Budget, ICAEW is urging the government to take bold decisions on simplifying taxes, removing obstacles to growth, tackling skills shortages and embracing the opportunities offered by moving to a net-zero economy.

Drawing on feedback from ICAEW members and the latest insights from our research, ICAEW has written a series of letters and a detailed submission to the Treasury ahead of the Budget on 6 March.

With business confidence remaining below pre-pandemic levels and economic growth continuing to flatline, ICAEW is positive that the UK can take advantage of the opportunities offered by new technologies and the transition to net zero. 

“As we approach the end of this parliamentary cycle, the government needs to prioritise the tackling of longstanding structural weaknesses that threaten to derail our economic potential,” says Michael Izza, ICAEW Chief Executive.

“That’s why we’re asking the Chancellor to use the Budget to invest in and incentivise HMRC to end the delays that taxpayers and our members tell us about daily. In addition, we want the Budget to focus on the green transition and to strengthen the public finances to ensure the economy is fit for the future.” 

In a letter to the Chancellor, Izza outlines four key areas of concern, alongside recommendations for the government.

Boosting productivity

A top priority must be providing long-term certainty for businesses, enabling them to focus on growth and innovation. “Businesses and investors want a vision that identifies and champions the technologies of the future,” writes Izza. 

The letter reiterates ICAEW’s call for the reintroduction of Growth Vouchers and the creation of Business Start-up Passports, as well as an alignment of government incentives for research and development.

A modern, simplified and digital tax system is vital in boosting productivity, according to ICAEW. 

“Businesses would keenly welcome a strategy which simplified taxes and digitised collection, making the system fit for the future,” explains Izza. “Making Tax Digital will work best when the underlying tax rules are simplified. To achieve this, bold decisions are needed and existing tax policies must change.”

Cliff edges on tax rates, thresholds and allowances must be reviewed, according to ICAEW, and tax policies should be amended to reduce administrative burdens on taxpayers and HMRC. 

Action must also be taken to address HMRC service standards, which have been beset with long-running delays, a message that has been further emphasised in a separate ICAEW letter to the Financial Secretary to the Treasury.

ICAEW believes that investment in HMRC should continue until its services improve, with incentives to drive performance. Current performance measures at HMRC should also be reviewed to ensure they drive the right behaviours. 

Skills and sustainability

“The UK has made notable advances on net zero, but mixed policy signals are stifling investment in low-carbon solutions, threatening competitiveness, and putting the net zero target at risk,” Izza warns the Chancellor. 

“As a result the UK is on course to meet only 17% of its UN Sustainable Development Goal targets. We urge government to show bold leadership to ensure the UK gets back on track.”

Recommendations for the government include the publication of a net-zero investment strategy and a transition plan for the whole economy. This document should outline how the government plans to decarbonise the public sector and fund support for businesses to make the transition.

Funding and policy certainty are only part of the picture, however. Izza argues that without the necessary skills in the workforce organisations, particularly small businesses, will not be able to make the shift to a net-zero future. 

“Businesses need support to secure talent to drive growth, and government should provide the leadership to enable this revolution,” he writes. “ICAEW members highlight the importance of a flexible and resilient workforce that adapts to an ever-changing environment.”

ICAEW is calling on the government to create a skills strategy that promotes digital skills, as well as financial and technical literacy standards in schools. ICAEW is also urging the government to increase the flexibility of apprenticeships while reducing bureaucracy.

Read the detail

You can read Michael Izza’s letter to the Chancellor in full, as well as ICAEW’s detailed submission to the Treasury, which includes further recommendations to support global trade and tackle economic crime.

ICAEW’s Tax Faculty has also written two letters to the Financial Secretary to the Treasury covering recommendations to improve HMRC service levels and suggestions for simplifications to VAT (import VAT recovery and non-registration thresholds).

Finally, ICAEW’s Public Sector team has written to the Chief Secretary to the Treasury in light of the Budget and the anticipated Spending Review. Among the recommendations is the suggestion that Treasury consider a Spending Review contingency plan covering at least two years of capital budgets, rather than the traditional one-year interim spending rounds seen during election years.

Budget 2024

Read ICAEW's analysis of the Chancellor's announcements and register to attend free Tax Webinar reflection on the potential implications.

Houses of Parliament

Further resources

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ICAEW outlines its vision for a renewed and resilient UK economy and a series of policy recommendations for the next government.

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