UK trapped in low growth, high tax, says CBI chief

The UK is caught in a “trap” of low growth and high taxes, a senior government business leader has warned.

Tony Danker, director general of the CBI, says spending pressures are increasing, taxes are too high and growth is too low.

He will tell a CBI/Centre for Policy Studies conference on Thursday that a series of measures are needed to transform economic growth.

These include replacing the apprenticeship levy with a new skills development fund, a 100% tax deduction for capital expenditure and the creation of an Office for Future Regulation.

Adopting the Office for Budget Responsibility’s (OBR) forecast of growth of 1.3% to 1.7% for the coming years will not be enough to avoid permanently high taxes given spending pressures, the CBI believes.

Mr Danker will say: “The current system is not working. Spending pressures are increasing, taxes are too high and growth is too low. We are trapped.”

“The government is of course in a difficult situation. It says we cannot afford to spend more on growth, but I say we cannot afford not to.

“Simply put, we will not pay down today’s debt, expand public services, or cut taxes by 1.6%.

“The OBR, an independent body, gives us a much-needed dose of realism. Its forecast reflects its judgement of the UK’s economic trajectory: once the rebound is complete in the next 18 months, our economy will grow by 1.3% to 1.7%. For a country used to 2% to 2.5% growth, that is simply not good enough.

“What is really worrying is that the government has accepted these forecasts as a target.

“Everything the government is currently trying to revive growth is only creating a new normal of low growth.

“We underestimated the UK. It’s in our numbers and in our plans, but at the CBI we believe we can do better.”