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BradleyCharlie Elphicke introduces an eight part series of articles from Conservative MPs on turbocharging Britain's growth rate here.

The series being run jointly by ConHome and the Centre for Policy Studies is kicked off today by Karen Bradley; the MP for Staffordshire Moorlands.

One of the few levers available to government to stimulate growth is tax. The right tax system can lead to increased tax revenues while also encouraging growth. For individuals and for businesses, tax is usually the single biggest bill and the difference between profit and loss, savings or debt. But for government, tax is the only way to fund public services.

The Coalition has been clear that it wants the recovery to be driven by private sector growth. The right fiscal environment can help by encouraging private sector businesses to grow and create more jobs. That means a the tax system that is simple, certain and competitive. This approach should also raise more revenue for the taxman – the question is how?

There are three tax areas that could provide fiscal stiumlus – indirect taxes, personal taxes and business taxes. Taking indirect taxes first, there would be a short term boost to the economy by cutting the rate of VAT, but the impact of higher inflation and personal debt would have a devasting long term impact. We cannot buy our way out of debt.


On personal taxes, there is one obvious cut – in the top rate of tax – that could help boost economic growth. With one of the highest rates of personal taxes in the world, the UK is finding it difficult to attract and retain the talent needed to grow it out of the downturn. But because personal taxes are a fertile source of ideological differences, political interests make it hard to employ them as engines of growth.

The 50p top rate of tax is undoubtedly a politically difficult issue, but there is growing evidence that this tax is damaging the economy and leaking taxes needed for public spending. Money Week reported in February that the Swiss Federation Migration Office had seen a 28% increase in the number of bankers relocating from the UK to Switzerland following the introduction of the higher rate. Those bankers were generating wealth in the UK: paying taxes on that wealth, probably around £53m of lost tax. That £53m would pay for a lot of nurses or teachers – and their pensions, it would pay for more than a quarter of the annual budget for Staffordshire Police Service, or for around a quarter of the interest that the UK pays every day on its debts.

But the real opportunity is in taxes on business. The announcement to cut the headline rate of corporation tax to 24% by the end of this parliament is good news, but it still leaves the UK with a high rate compared to its competitors at 12th highest out of 31 OECD countries. And in 2009, the average rate of tax in the EU was 23.2%, which is lower than the UK’s target rate for 2015. Here the Coalition can and should be bolder. A 2% per year reduction would lead to a rate below 20% by the end of the Parliament, giving the UK one of the five lowest corporate tax rates in the OECD. This would attract business to invest and locate in the UK, provide jobs and pay tax.

It is not just large businesses that require a competitive environment. One positive phenomenon of Britain’s economy today is the role of serial entrepreneurs. Business angels and dragons – not just of TV fame – are key to growing smaller businesses, and the tax system should work to encourage them. The days of businesses passing from parent to child are rarer and rarer – research suggests that only 24% of family businesses survive to the second generation. Today’s entrepreneurs want to grow a business and make a capital gain which they may then invest in new ventures. Increasing and extending the relief from capital gains tax for entrepreneurs to allow serial entrepreneurs to keep more of their gains will lead to increased investment in more new businesses with the consequent new jobs and taxes these create.

With low, simple and certain taxes, the UK economy could get the turbo boost it needs.

65 comments for: Karen Bradley MP: Cut the 50p rate, cut corporation tax, cut capital gains tax

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