Business Surgery, Keith Senior, of Bury St Edmunds accountants Jacobs Allen, is disappointed with the government's tax policy

One of Rishi Sunak’s five pledges made on January 4 was to promote growth, but most economists believe that the UK economy will contract in 2023, so perhaps the growth he’s promising will be from a low point in 2024.

People’s jobs depend on businesses being able to support higher wages and better employment prospects.

When business taxes are increasing and there are immediate calls for higher wages to cope with high inflation and the so-called ‘stealth taxes’ of frozen allowances, it’s little wonder that many small and medium sized businesses are struggling to survive, let alone grow.

It is widely agreed that small businesses are the bedrock of our economy and there have been suggestions from the British Independent Retail Association for a more stimulating set of policies to increase consumer confidence, particularly in essential goods, that should lead to increased spending without fuelling inflation. Certainly it seems that small businesses cannot be left to suffer the majority of the burden of the tax increases. They generally suffered most during the Covid pandemic with little support from government for business owners sensibly used to taking their profits in the form of dividends. Their reserves are likely to have been significantly diminished so they are not able to easily shoulder the burden of increased taxes.

With the overall tax burden set to reach an all-time high (in peacetime) in 2024, that and high interest rates are likely to stunt any growth prospects, which are key to enabling better business and employment prospects.

There have been numerous suggestions from both government and opposition to impose additional taxes on the perceived wealthy, but already we have seen potentially adverse reaction to the energy companies’ windfall taxes inhibiting their investment. And if wealthy individuals depart the UK because of taxes being too high, that will leave more tax for the rest of us to pay, so a sensible compromise to getting everyone to pay their ‘fair’ share of tax is necessary even if politically difficult.

The Prime Minister and Chancellor have coalesced policy to increase headline rates of tax but there are arguments that without a fundamental review of our complex tax system, it is more difficult to achieve fairness across all families.

Kwasi Kwarteng had instigated a review of our tax system to make it ‘simpler and more dynamic’ but those plans have been dropped by Jeremy Hunt. There are calls for it to be reinstated to try and achieve a lower tax economy that gives more impetus to growth, which is to be commended.

Keith Senior is a director of Jacobs Allen accountants in Bury St Edmunds