TWO dozen policy changes to encourage growth could be made by the government at no extra cost to taxpayers, the Institute of Directors recommended today.
The proposed reforms fall under 10 main areas for the coalition to focus on, the IoD said.
The inherent tendency of governments to over-regulate requires a “game changer” in civil service pay and promotion structures, it said.
“Only when the bureaucracy is given the incentive to slim down will it do so,” the report said. “The record of deregulation by governments of all persuasions is poor.”
And tax reforms could be made without endangering fiscal consolidation, the IoD said.
The 50p top rate of income tax “will raise little or no extra revenue.” The top band, which is supposed to be a temporary measure, “reduces the incentive to work, save and invest for the most entrepreneurial in our society,” the IoD said.
The tax also deters wealthy, mobile individuals from locating in the UK. “We do not want to see the UK marked out as a high tax country,” the report stated.
Small businesses and new start-ups must face fewer barriers to trade, such as red tape, the IoD argued.
The report calls for a freeze in capital gains tax for new business and an annual investment allowance of up to £25,000 a year.
The group has also called for a relaxation of restrictions on building on the green belt. As well as boosting the economy, “greater land release could also lead to lower land and house prices and greater affordability,” they said.
“The government’s deficit reduction strategy is central to improving growth prospects,” said the IoD’s Miles Templeman, “but it also needs to reform the supply-side of the economy to boost the private sector.”
IoD: 10 IDEAS FOR GROWTH
1. Reform employment law: Employing people must be cheaper, especially for small and medium sized businesses.
2. Encourage deregulation: Whitehall must incentivise civil servants to cut regulation.
3. Choice in public services: “Radical” reform of the public sector through market forces.
4. Spend on infrastructure: Any profits from resale of the government’s banking shares to pay for infrastructure.
5. End planning restrictions: Release land for development.
6. Localism: End national public sector collective pay bargaining.
7. Tax incentives: Scrap the 50p tax rate, the IoD says.
8. Competitive energy policy: Clarify energy policy and scrap changes to air passenger duty.
9. Corporation Tax Reform: Reduce the tax to 20 per cent.
10. Fiscal tightening: Cut public spending to GDP ratio to 35 per cent by 2020.