US Edition In a letter to the Chancellor, more than 30 of the City’s top figures agree that the “current turmoil in southern Europe” means that the Government must take “immediate actions” to boost confidence. They call for the immediate scrapping of the 50p rate to attract entrepreneurs to Britain and a £1,000 increase in the tax-free personal allowance.
The plea comes after an official forecast from the European Union estimated that the single currency crisis would cost the British economy more than £37billion — equivalent to almost £1,500 per household — and threatened to push this country back into recession.
In their letter, published in The Daily Telegraph today, the business leaders urge the Chancellor to increase spending on infrastructure projects and to overhaul tax policy.
“We would encourage an acceleration of the Government’s commitments on two areas of tax policy: increasing the personal allowance and restoring 40 per cent as the top rate of income tax.
“An early removal of the temporary 50 per cent tax rate would attract wealth generators to the UK and support the entrepreneurs we need to help us grow the economy and provide jobs.
“We await the conclusions of the HM Revenue and Customs evaluation of the sums raised by the 50 per cent rate. However, we are confident that the cost to the Treasury, if any, in the short term will not be material and that the advantages over the life of this Parliament in terms of generally increased economic activity will more than outweigh any direct costs.”
The letter calls on Mr Osborne to lift the tax-free personal allowance by £1,000 more than planned, to just over £9,000 in 2012.
Among the signatories are Sir Nigel Rudd, the chairman of BAA, the airports operator; Chris Grigg, the chief executive of British Land; Tony Pidgley, the chairman of Berkeley Group, the house-builder; Harvey McGrath, the chairman of Prudential; and Ian Powell, the chairman of PricewaterhouseCoopers.
Sir David Rowlands, the chairman of Gatwick Airport, and the chief executives of major advertising firms, construction companies and power providers have also signed the letter.
They call on the Chancellor to bring forward spending on infrastructure and to work on a replacement for the controversial private finance initiative. The letter also urges the Government to introduce proposed changes to the planning system, which have been opposed by many countryside groups. Earlier this week the Confederation of British Industries urged the Government to bring forward its infrastructure spending plans to get “shovels in the ground”.
David Cameron and Mr Osborne are both thought to favour scrapping the 50p rate of tax, possibly as early as next year. However, the move is being publicly blocked by the Liberal Democrats, who have demanded that further taxes on the wealthy are introduced.
Downing Street aides are concerned about scrapping the tax on higher earners for fear that they will be attacked for being “out of touch” with ordinary people. The Chancellor is working on plans to unveil a new growth strategy in his autumn statement later this month. The strategy is expected to focus on cutting regulations for business, although some Downing Street advisers have become frustrated that more radical plans, such as the scrapping of unfair dismissal laws, are not being considered.
Vince Cable, the Business Secretary, said yesterday that tax cuts were not currently being planned. “It’s difficult to make tax cuts in an environment where we’re trying to get budget discipline back,” he said. But, he added: “The Chancellor is looking at all options. I’m not ruling anything out”. Mr Cable also raised the prospect of “Armageddon” in the British banking system in the event of the collapse of the single currency.
The Prime Minister said that it was a “very alarming time for the world economy” and told European leaders that they “must act now”.
An aide to Mr Osborne said last night: “We welcome this contribution from business leaders. We have already increased capital spending above Labour and taken a million people out of tax. We have asked the HMRC to look at the 50p rate and await the report.”
Yesterday, the EU sharply downgraded its forecast for economic growth across the continent. European growth is now expected to average just 0.5 per cent next year, compared with a forecast of 1.8 per cent issued earlier this year.
“Growth has stalled in Europe and there is a risk of a new recession,” said Olli Rehn, the European Commissioner for Economic and Financial Affairs.