Mark Taylor, Co-founder of Element45, is the Chair of the Business Commission West Midlands.
He has been pivotal in supporting engagement in the region’s business community and the creation of the final ‘Roadmap for Business Growth’ report.
Mark reflects on the findings of the Commission in light of political and economic changes one year on from conducting the BCWM research in this blog.
When we undertook the research for the Business Commission West Midlands project last year, one of the clearest and strongest asks from local business was certainty and clarity on tax strategy.
Well, like or loathe the detail, we seem – at least - to have ticked both of these boxes. In the last few days, Rachel Reeves has reinforced her promise of no more tax rises for the rest of this parliament, as she battled to calm the anger of the business community at the CBI Conference.
But the main trigger for this ire towards the Chancellor remains front and centre.
Business leaders – from retail, hospitality, social care, construction, biscuit manufacturing… well, basically, pretty much everywhere you care to look - have been forming a long and not very orderly queue to lambast the strategy of raising employer’s national insurance contributions.
Set to raise an additional £25bn per annum over the course of the parliament, this is one of the largest tax increases in our history. Anti-growth is among the kinder labels given to it.
Unnecessary additional annoyance has been created by the debate over what constitutes a “working person”, as the new government maintained its argument that the main taxes (income tax, VAT and national insurance) directly impacting on this tricky-to-define group would not rise.
Placing this further national insurance burden on employers rather than employees has allowed Labour to maintain that this pledge has been kept… but very few business people are finding that argument easy to digest.
Without doubt, this cost will soon be passed on to the workforce at large in the shape of both fewer overall jobs created and reduced pay rises.
This is certainly the case at a number of clients that my partner and I work with at our new advisory business, Element45.
Painful pay review conversations up and down the land in 2025 will reference the reduced pot available for individual employee increases now that the Chancellor has taken this additional slice.
For a new government eager to promote growth and drag Britain out of its productivity slumber, it has been a bumpy start with the business community (and that’s before we get into the erosion of other tax reliefs that have historically benefited entrepreneurs, the lack of action on business rates etc).
Come what may though, we can’t afford to get too down about it all and lose focus. So, as someone who is naturally keen to find positives … when the red mist clears and business – as it always does – reverts to keeping calm and carrying on, could we have the following long-term benefit to cling to?
Maybe I am giving too much credit, or guilty of wishful thinking but, perhaps, there is deliberate, strategic method in targeting the tax rises in this direction, over and above a short term necessary plug in the national finances.
The conundrum around how to relight the fire of productivity gains in Britain’s economy has been around now since the Global Financial Crisis took hold over fifteen years ago.
It’s become a frustratingly ever-present topic that so many in business are tired of hearing about and sincerely wish we could discover the solution to.
Failure to deliver on this front has left the key measure of “GDP per hour worked” for the UK significantly behind the USA, Germany and France - and even lagging the Eurozone average - resulting in serious consequences for our collective national wealth.
Now, faced with increasing costs associated with adding more people to the workforce, perhaps this will force the hand of UK business to instead invest in different, longer-term strategies, i.e. through accelerated technology adoption, which do, eventually, benefit productivity and result in labour being redirected. Surely, investments in robotics and artificial intelligence are only likely to gather increasing pace as a result of this “tax on jobs”.
The other side of this equation is, of course, where exactly will the surplus, non-hired labour be redirected to? To other jobs where it can contribute more productive value to the economy? Great. To retraining and reskilling so that it is more useful and valued? Excellent. Out of the workforce altogether as its skills are no longer relevant? Not so good.
It is incumbent on this government (and subsequent ones), through the development of a skills strategy that truly and proactively addresses the future needs of business (another important topic emphasised through the work of BCWM) to ensure that it is not the latter.
If it can do that, then, just perhaps, in the fullness of time, we’ll look back on the Budget of autumn 2024 (from the sunny uplands of a productivity-boosted future) with a good deal more positivity than is evident today… we live in hope!
