UK caught in trap of low growth and high taxes, says CBI chief

The UK is caught in a “trap” of low growth and high taxes, a senior business leader is warning the Government.

Tony Danker, director general of the CBI, says there are rising spending pressures, too much tax and too little growth.

He will tell a CBI/Centre for Policy Studies conference on Thursday that a series of measures are needed to transform economic growth.

These include replacing the apprenticeship levy with a new skills challenge fund, a 100% tax deduction for capital spending and establishing an Office for Future Regulation.

Adopting the Office for Budget Responsibility (OBR) forecast of 1.3% to 1.7%  growth for the coming years will not be enough to avoid permanently high taxes given spending pressures, the CBI believes.

Mr Danker will say: “The current settlement isn’t working. There are rising spending pressures, too much tax and too little growth. We’re caught in a trap.

“The Government are in a tough spot in all of this of course. They say we can’t afford to spend more on growth, but I say we can’t afford not to.

“Simply put, we will not pay down today’s debt, extend public services and reduce taxes on 1.6%.

“We get a much-needed dose of reality from the independent OBR. Their forecast is their judgment on the UK’s economic trajectory: once the rebound is complete in the next 18 months, we will grow as an economy by 1.3–1.7%. For a country that is used to growth at 2–2.5% it is simply not good enough.

“What’s truly worrying is that the Government has accepted the forecast as the target.

“Everything the Government is currently trying, to get growth going, merely achieves a new normal of low growth.

“We have lowballed the UK. It’s in our numbers, and it’s in our plans, but at the CBI, we think we can do better.”