Chancellor must ‘stimulate recovery, not stifle it’, business leaders tell LBC

28 February 2021, 11:39 | Updated: 28 February 2021, 11:44

CBI head: Tax hikes could hamper UK's Covid recovery

Chancellor Rishi Sunak must use his budget on Wednesday to “stimulate the recovery rather than stifle it” and avoid “knee-jerk tax increases”, business leaders have told LBC.

Speaking exclusively to Swarbrick on Sunday, Director General of the Confederation of British Industry Tony Danker, said he thinks Wednesday’s announcement is “going to be a blockbuster of a budget”.

Amidst reports that Rishi Sunak may increase some taxes to tackle the huge debts incurred during the pandemic, Mr Danker warned this could harm business confidence and growth.

Pressed on the possibility of higher taxes, the CBI leader said: “If your question is do we think that businesses and the wealthier in society should be paying more tax overtime, once the economy is growing, in order to help tackle the debt: absolutely.

“I think it is risky to do that now. We don’t have a reopening let alone a recovery. The objective has to be stimulating business confidence, investment, growth and jobs. So I would be cautious about doing that now."

"That is the real test of the budget and I hope we stimulate the recovery rather than stifle it."

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He added: “I just hope on Wednesday, we come out of the budget saying ‘You know what? I think the economy is going to roar this year.’

“Then obviously once the economy starts roaring we all have to turn our minds to how we bring down the debt.”

Also speaking to LBC’s Swarbrick on Sunday, Luke Johnson, Chairman of Gail's Artisan Bakery and the Brighton Pier Group, said the chancellor must avoid “knee-jerk tax increases that will discourage people from taking a risk” and growing businesses.

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Sunak must steer clear of 'knee-jerk' tax hikes

Mr Johnson said he recognised there is “a lot of repair work to be done, both for the economy as a whole and for the national finances”, but that the long term recovery must address structural issues that have been put off for years.

“I think in a way, we can question the old assumptions and say things cannot carry on as before, using excuses to address underlying problems,” he explained.

"In, for example, the tax system, we need to tax passive gains and we need to reward those that create employment and take risks and innovate.”

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Luke Johnson: 'We need to tax passive gains'

The former Pizza Express chairman said did not “at all” think capital gains tax should go up for “those who are making the gains are taking the risk and innovating and creating jobs”.

However, he called on the chancellor to increase capital gains tax on things such as property, questioning “why everyone should make a free capital gain on their home when they sell it”.

Mr Johnson also said he felt the government’s announcement of £5 billion in “restart” grants for businesses hit hardest by the lockdown was part of “shorter term measures” that are not “addressing the structural problems”.

Instead, he called on the chancellor to “promise” to initiate a “complete reform” of business rates, which he argued creates an “unfair burden on high streets... that helps destroy communities and kill jobs.”