CBI calls for a "pro-enterprise" government with impending Brexit

The business organisation’s wish list, on behalf of its 190,000 members, contains policy suggestions for Chancellor Philip Hammond’s upcoming Autumn statement on 23 November 2016.

“We do want this to be an ambitious pro-enterprise plan. We think this is a very important autumn statement,” said CBI’s director general Carolyn Fairbairn.

The total proposal will cost the government £11.5bn at 0.6% of gross domestic product by 2017/18 and will fall to £7bn, 0.3% of GDP, by 2021.

Fairbairn set out the two overarching objectives for the proposal as boosting short term business confidence and supporting productivity growth in the long term.

“The economy has been pretty resilient under uncertain conditions following the referendum result but there is still huge uncertainty around the future shape around that relationship,” said Fairbairn. These measures are designed to “help businesses to navigate this very uncertain future”.

She pointed out that “gaps between productivity in different parts of the UK are too high and this is an opportunity to start to close them” and have all regions “firing on all cylinders”.

CBI’s chief economist Rain Newton-Smith pointed out that output levels in areas outside of London and the South-East are below the levels in 2007, which “just isn’t good enough”.

Fairbairn feels the government could close the gap through investment in infrastructure and innovation.

She would like annual public sector net investment to rise to 2% of GDP at £6bn and the fast delivery of £425bn worth of planned infrastructure investments with clear timeframes and implementation plans particularly in road and rail investment.

“With interest rates at rock bottom, now is the time for the UK to put serious effort into improving our creaking infrastructure,” said Fairbairn.

In terms of innovation, CBI would like funding for Innovate UK, currently at £0.6bn, to double as well as a surpercharge of the research and development (R&D) tax credit system by 50%. It would like the long term target for public and private expenditure on R&D to be 3% of GDP by 2025.

Newton-Smith mentioned that the government should implement a modern “industrial strategy” that capitalises on the UK’s areas of “competitive advantage”.

In order to spur short term investment, the CBI feels the government should increase the annual investment allowance to £1m until the end of 2018.

“Amid economic uncertainty, it’s important that the government does what it can to incentivise business to invest today, rather than postpone until tomorrow,” said Fairbairn.

Another incentive for businesses would be to cut business rates as well as an exemption of new plant and machinery investments, she added.

Philip Hammond announced at the beginning of the month at a Conservative Party conference that he plans to lower corporation tax from 20% to 17% over the next three years. CBI say their members welcome the change but demand cuts to business rates, which represent 15% of their total tax contributions.

The organisation also suggested the government ditch its “outdated business regime” around charging higher business rates for those who implement renewable energy practices within their firms.

Another big policy change they proposed to increase social mobility was to bridge the gender gap and enable parents to participate more in the workforce throughout their careers. It demands an extension of statutory mandatory pay to 52 weeks and providing 15 hours of free universal childcare to all children from the age of one to four.

“I can certainly speak from personal experience [that] the high cost of childcare forces parents to make tough choices. Some of our own analysis suggest that a more joined up approach to childcare could increase female employment by 2% in the medium term increasing household income and having the potential to reduce income inequality,” said Newton-Smith.

Newton-Smith also went on to suggest further funding in public services to regain public confidence in the current immigration system post-Brexit.

Despite the expensive shopping list proposed, the organisation believe the demands are moderate. “We believe it will provide meaningful support to the economy without increasing the challenge of deficit reduction over the long run and we do still support the balancing of public finances within the economic cycle,” said Newton-Smith.

Hammond recently said that he would no longer be targeting a fiscal surplus given the current economic climate, which CBI welcome as a “flexible measure”.

“We think this will provide a shot in the arm to businesses in every corner of the UK, companies of all sizes from entrepreneurs up to larger companies, innovators, manufacturers and service providers to drive up productivity and crucially drive up prosperity and living standards during this historic period at the same time as encouraging investment during this period of inevitable uncertainty,” said Fairbairn.