Chancellor should add a fifth E for ‘Empty’ to his vision for the economy

Responding to the speech by Chancellor of the Exchequer Jeremy Hunt, in which he set out his long-term vision to grow the economy, the Institute of Director’s Chief Economist Kitty Ussher said:

“It’s good to see the Chancellor championing Britain’s strengths to potential investors, in particular our high-tech industries, our world class universities and our deep financial markets.  He is also right to emphasise the importance of bringing down inflation and increasing labour supply, both of which are of deep concern to business leaders, affecting sentiment and constraining investment.

“But while he referenced the current Prime Minister’s Mais lecture of a year ago, that opened the door to using the tax system to encourage investment in people, capital and ideas, we heard nothing about how it would be done. The Chancellor himself said today’s speech was “not a series of measures or announcements”. We would therefore add a fifth E for ‘Empty’ to his 4 E’s economic framework.

“Business needs government action to counteract the negative mood, for example through a continuation of the capital investment super-deduction, through tax credits for employers who invest in skill shortage areas and a plan to incentivise the net-zero transition for the SME sector.

“There is also a gap in the Chancellor’s rhetoric. While of course we should seek to ensure that firms operating at the frontier of new technology can come to Britain and thrive, our future growth path also depends on the many millions of individual decisions taken by leaders of smaller businesses across all sectors whose attitude to continual improvement and investment, including the adoption of innovation undertaken elsewhere, is nevertheless crucial to our future growth path.

“Without action, these foundational businesses may not take kindly to being told by the Chancellor to take on more risk, when the environment they operate in feels problematic due to factors outside their control.”