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|15 Policies To Boost UK Competitiveness And Prosperity|
|Wednesday, 25 November 2015|
Tax Simplification and Reduction
Focus on Marginal Tax Rates: High marginal tax rates are leading to poor work incentives and anomalies throughout the tax system and should be reduced where possible. For example:
- for the low paid (particularly for those receiving tax credits), the effective marginal rate of tax can be 73% (or higher in some cases)
- a single earner with three children earning between £50,000 and £60,000 faces an effective marginal rate of 66.5%
- an individual earning between £100,000 to £121,200 has an effective marginal rate of 62%.
Reform Inheritance Tax: The UK currently faces one of the highest effective inheritance tax rates of any country in the developed world. Cutting inheritance tax from 40% to 20%, (paid for by ending the agricultural property relief and business property relief) would be a simpler and less distorting reform than the government's current proposals.
Announce a major review to simplify business taxation.
Ahead of major pension announcements expected in next year's Budget, rapidly increase today's private pension age of 55 to 60 by 2024.
Reduce the high unilateral UK Carbon Price Support: the UK Carbon Price is currently over £18 per tonne of CO2 emitted compared with an average of £6 in the EU. This needs to be cut before it forces the premature closure of more baseload power plants and thus threatens energy security and affordability.
Review and revise the Infrastructure Act: this gives the Committee on Climate Change new blocking powers over future fossil fuel energy projects. With only 52,360MW of dispatchable capacity remaining by the end of March 2016, the resilience of UK generating capacity is concerning (the National Grid’s 2015/2016 Winter Outlook forecast a demand of 54,200MW).
Set out a renewed initiative to ensure the planning process for shale exploration is fast-tracked. (See "The Great Green Hangover".)
Boost Private Housing: Annual housebuilding completions reached 125,000 in 2014-15, dwarfing the 320,000 needed to alleviate housing strains. The Autumn Statement needs to promote measures for a planning system that is lighter and more streamlined. Look out for the creation of so-called ‘Pink Zones,’ where existing regulatory burdens would be reduced.
Encourage Housing Associations to Build: The current level of housebuilding by housing associations is very modest, reaching around 24,000 for the year 2014. The Autumn Statement should lay out proposals that incentivise housing associations to invest in greater levels of housing stock. (See "Pink Planning – diluting the red tape".)
Introduce Infrastructure Project Bonds: The Government is set to commit £100bn of spending on infrastructure in the Autumn Statement. The Autumn Statement should set out the creation of infrastructure bonds to finance investment, which could potentially provide attractive yields for investors and unlock new streams of cheap infrastructure finance.
Direction on Airport Capacity Expansion: A new runway is desperately needed in the South East to continue promoting trade and investment into the UK. While a final decision on increased airport capacity is unlikely to be announced in the Autumn Statement, look out for any indication as to whether a final decision will be announced before the end of this year.
Promote the Sharing Economy: The Summer Budget brought in welcome measures to boost the sharing economy, including the increase of the Rent-a-Room tax free allowance to £7,500. The Autumn Statement should build on this by introducing measures to further promote the sharing economy.
Reform Patents: The performance of UK innovation could be improved. Patent renewal fees should be abolished and the process for patent application should be simplified. (See "Abolishing the innovation poll tax".)
A Change of Focus on Apprenticeships: While the Government’s commitment to three million new apprenticeships is welcome, there has been an excessive growth in the number of service based apprentices, with little improvement in the number of apprentices in the engineering, manufacturing and technology sectors. The Autumn Statement needs to re-gear the programme to promote apprenticeships in industries that have the strongest demand for a skilled workforce.
Business Improvement Districts
Roll out property owner Business Improvement Districts: BIDs outside London cannot receive funding from property owners unlike in London which reduces the potential for long term improvements to local areas. Property Owner BIDs should therefore be rolled out across the rest of the UK.
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