Pre-Budget Report: Darling could drive out UK business

The tax increase would be on top of the new 50pc rate for those earning over £150,000, which was announced in the Budget and is due to be introduced in April 2010. A 60pc rate would raise more than £2bn a year for the Treasury according to Ernst & Young.

The Chancellor has not commented on specific measures that might be included in Wednesday’s PBR, but said yesterday: “As we come through a difficult period like this. . . you would expect the broadest shoulders to bear the greatest burden.”

However, David Frost, director general of the BCC, said the potential changes would be “enormously damaging” for Britain at a time when it needs talented people to drive an economic recovery

“The very people we need in this country to create wealth could be located anywhere and will simply go somewhere else. Taxes above 50pc would be hugely harmful for the UK. This is the very time that we need as much business in the UK as possible.”

He added that a windfall tax on bonuses would be complicated to implement and that now was not the right time to consider such a proposal.

Michael Wistow, head of tax at City law firm Berwin Leighton Paisner, said businesses were already relocating to countries with more favourable tax regimes, notably Switzerland.

“We are already seeing the start of a City exodus following concerns that the 50p tax will force the rich to foot the bill for the economic downturn.

“The UK’s international appeal is being undermined by an uncertain and punitive tax regime that is increasingly alienating the business community. Instead of having a reputation for a stable tax regime, the UK is increasingly being seen as unhelpful, aggressive and unpredictable,” he said.

Mr Darling will be under intense pressure on Wednesday to outline exactly how he intends to halve the deficit – set to reach around £180bn this year – in the next four years. Economists have warned that otherwise, Britain will put its top-tier credit rating at risk.

Separately the National Institute of Economic and Social Research (NIESR) said that further stimulus would be required from the Treasury to boost the economy because recovery is set to be weak.

It said a temporary fiscal expansion should only be introduced if the Chancellor also announces a “convincing plan” to consolidate the public finances. About £60bn a year would be required to deal with a structural deficit of 4pc of gross domestic product, NIESR said.

  Share:

Leave a Reply

*