Fox returns to demand tax cuts

By Alex Stevenson and Oliver Hotham

Momentum towards tax cuts is continuing to accelerate, as Liam Fox and the CBI add their weight to calls to help businesses foster Britain's economic recovery.

Pressure on chancellor George Osborne to reduce the tax burden on British firms is slowing increasing ahead of next month's Budget.

Liberal Democrats within the coalition want the income tax personal allowance increased to £10,000 quicker, while Labour is calling for a cut in VAT from 20% to 17.5%.

But it is Mr Fox's intervention, his first since losing his job as defence secretary over a lobbying scandal last autumn, which has underlined the greatest source of pressure – from Conservative backbenches.

"There is a strong argument for further public spending reductions, not to fund a faster reduction in the deficit, but to reduce taxes on employment," he wrote in an article for the Financial Times newspaper.

"Although the coalition agreement may require the chancellor to raise personal tax allowances (which should be paid for with spending restraint not new taxes) he should use the proceeds of spending reductions to cut employers' national insurance contributions across the board.

"If that is deemed impossible, he should consider targeting such tax cuts on the employment of 16- to 24-year-olds, making them more attractive to employers."

Mr Fox also used his article to press for steps to deregulate the labour market. He said it was too hard for companies to hire and fire staff, arguing: "It is intellectually unsustainable to believe that workplace rights should remain untouchable while output and employment are clearly cyclical."

Honour your commitments, CBI tells Osborne

His move came as the leading pro-business lobby group, the Confederation of British Industry (CBI), published its submission to the Treasury ahead of next month's Budget.

It urged the chancellor to reform the tax system and press on with implementing the proposals contained in the autumn statement.

"Delivering private sector investment in infrastructure, supporting mid-sized businesses, hammering out the details on credit easing, extending the Youth Contract to 16- and 17-year-olds, and introducing the new build indemnity scheme for mortgages at the earliest opportunity will all provide a real boost for UK growth and jobs," director-general John Cridland said.

"We also want to maximise the incentive for businesses to invest in Britain. So we're calling on the government to make some targeted changes to the UK tax system, which could make an impact on business decisions and create new opportunities for growth.

"While the state of the public finances is tight, the chancellor still has an opportunity in this Budget to make sure the UK tax system is as internationally competitive as it can be."
The CBI proposes the government simplify the tax system to encourage investment, develop new types of finance to help companies grow and attempt to guarantee that environmental taxes would encourage business.