Free childcare should be extended to one and two year-olds, a prominent business group has told the UK government, while low paid staff should be handed a tax-free bonus to help cope with the cost-of-living crisis.
(Bloomberg) — Free childcare should be extended to one and two year-olds, a prominent business group has told the UK government, while low paid staff should be handed a tax-free bonus to help cope with the cost-of-living crisis.
The Confederation of British Industry outlined a list of measures it would like to see the Chancellor of the Exchequer Jeremy Hunt announce in his spring Budget on March 15, with a focus on easing labor and skills shortages.
The CBI has written to Hunt to urge him to take “bold moves” to drive growth. Parents in the UK currently receive as many as 30 hours of free childcare a week, during term time, for three and four year-olds before they start school. The CBI said extending the program to younger children would allow more people to return to the workplace.
The CBI estimated this could cost the taxpayer £8.9 billion ($10.75 billion) each year, but argued that inadequate access to childcare prevents around 1.7 million women from taking on more hours — leading to £28.2 billion in lost economic output.
The business group also proposed a tax-free cost of living allowance of as much as £650 for low-paid workers, with the aim of easing industrial relations while curbing inflation by avoiding higher, permanent salary rises.
“With a new Whitehall machinery in place, this Budget is the opportunity to get the UK out of any recession sooner rather than later and transform the UK into a high-growth, innovation-first economy,” said Tony Danker, director general of the CBI.
Read More: CBI Tells Tories to End Tax War and Prioritize UK’s Green Growth
The business group also wants Hunt to introduce a replacement for the super-deduction, which has allowed firms to cut their tax bills by as much as 25p for each pound they invest. It gives firms 130% tax relief on the qualifying cost. However, this is due to expire in April, while at the same time corporation tax is rising from 19% to 25%.
The CBI has previously said that the removal of the super-deduction would push the UK to 30th place out of 38 OECD countries in terms of tax competitiveness, down from the fifth position today.
Louise Hellem, the CBI’s director of economic policy, said the the six-point rise in corporation tax as the super-deduction ended would have a “huge impact” on “desperately needed” investment. Full expensing for capital investment should be introduced to offset the impact, the CBI said. “Our proposals on full expensing would see the UK back in the game on global investment,” she said.
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