Keith Senior, of Bury St Edmunds accountants Jacobs Allen, speculation on possible growth measures in next week’s Budget

One major problem besets the government in its management of the economy – the issue of low growth coupled with higher wage expectations in an era of higher inflation.

There has been no shortage of advice to the Chancellor, Jeremy Hunt, of what to focus on in next week’s Budget. He has so far rebutted any intention of keeping corporation tax rates at the same level as currently exists – 19%, and has insisted that putting this up to 25% (or 26.5% on profits in a marginal band from £50,000 to £250,000) is the right thing to do. Lower taxes promote growth, while higher rates depress it.

Now, three former Chancellors, Hammond, Kwarteng & Osborne, have added to the furore by saying that this rise is disastrous for the economy. They have been joined in that by the Federation of Small Businesses, who have stated that their members feel that corporation tax is top of their list of things they need help with. And the mechanics of such a rise is to impose a marginal rate as noted above, that is higher than the headline rate. In this way it affects many smaller businesses to a greater extent than large businesses. We therefore would add our voice to the call for keeping the rate at 19% or even cutting it, in a bid to improve growth and the country’s economic prospects.

Another matter has also been the subject of much lobbying is a substantial reform of business rates to try to assist high street businesses in particular, which face much greater property costs than online retailers with large out-of-town warehouses. One of the answers to this is a more radical move to replace both business rates and Council Tax with a system of Land Value Tax. This has the advantage that it is a levy on the underlying value of land, no matter what its purpose, and so creates a more level playing field across all sectors, retail, other business, agriculture potentially and residential. The value of the land stems from the utilities that are in close proximity rather than trying to value what the land is used for. In this way, a utility burden is equalised across all taxpayers. It also avoids any influence over business decisions such as allocation of resources. The institute for Fiscal Studies has previously suggested this as a solution such that taxes raised are distributed back to the community from which the land derives its value.

If coupled with reform of planning laws, this could have a substantial and effective benefit in promoting better land use to develop more affordable housing, increase house building markedly, which leads to an improvement in our economic growth.

I have little faith that either of these suggestions will find favour but feel that we have to keep trying to help improve our economy and look positively to the future for us all.

Keith Senior is a director of Jacobs Allen Chartered Accountants