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Baroness Valentine, independent crossbench peer and chief executive of London First, sends an open letter to the chancellor ahead of the Budget.
Dear Chancellor
It's been six weeks since the election, and no doubt you're looking forward to a rest after the scale of the challenges you've faced since taking up office. But, before you put your feet up, there is the small issue of the Budget.
In such difficult times, spending cuts and tax increases are inevitable, but it is vital that these are made wisely. There are a number of things that you can do to ensure that London and the UK economy continue to grow, despite the steps needed to reduce the deficit.
The first is to ensure that international competitiveness is put at the heart of every measure government takes. Over three-quarters of businesses polled in London think that doing business is getting harder, with uncertainty over tax, and negative attitudes towards the City felt to be hindering competitiveness. Worrying, I'm sure you will agree. Asking whether measures will support, or do as little damage as possible to, economic growth would be a smart move – ignoring this is sure to make the road ahead much worse.
Then there's the issue of spending cuts and tax increases – the best course to take would be an 80:20 split of spending cuts to tax increases, prioritising public spending by shutting down programmes that have marginal impacts. Private sector experience will be key here, as government's track record of failing to make real cash efficiencies is well known! For the UK to emerge from the fiscal crisis in good shape for future growth, you would be wise to protect infrastructure investment, which would unlock much-needed economic capacity.
To ensure you don't deter the much-needed investment from international companies who choose to, but don't need to locate here, a predictable, consistent and competitive tax framework for both corporate and personal taxes is a must. A nod from you that you aim eventually to lower the 50 per cent higher rate of income tax would help keep London and the UK in the race for international investment and talent. Where more tax rises are needed, the only ones that should be considered are broad-based and indirect taxes, such as VAT, where small changes raise big amounts and have minimal effect on competitiveness.
And lastly – you really do need to address the relationship with business, which so deteriorated after the credit crunch, particularly in the run-up to the election. Business can grow the country out of the current crisis – but a perception that the UK is anti-business risks damaging both London and the UK's long-term economic recovery.
Good luck!
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