cbi response to richard murphy

The Great Business Debate has been established by the CBI to help build public confidence in business. We firmly believe that when business as a whole succeeds, people up and down the country benefit from this success. On a whole host of issues we are encouraging businesses to speak out about what they do and address difficult issues head on. As Richard Murphy highlights, this means having an honest conversation about the tax that business pays, but also taking action that will ensure everyone sees the benefits of economic growth and asking what more business can do for working parents and local communities.

We’re prepared to talk candidly about how business has not always got things right. Through our media scanning, we regularly pick up negative stories about what business does or how it does it. With only 53% of people thinking business makes a positive contribution to society, it’s clear that business needs to make a better case as to why it is so important to all our lives.

 ”…the CBI has been an active contributor to the tax debate for many years, and continues to work with its members to both set out the facts and put forward solutions.” 

The continuing public conversation about tax avoidance demonstrates that business still needs to do more to address people’s concerns. That’s why the CBI has been an active contributor to the tax debate for many years, and continues to work with its members to both set out the facts and put forward solutions. In 2012, we made a joint submission with Action Aid and Christian Aid to the International Development Committee setting out our “agreement that a properly functioning tax system – one based on good tax policy, and an efficient tax administration – is critical to the functioning of a stable, prosperous state that responds to the needs and wishes of its citizens.”

The CBI also encourages its members to get behind our Statement of Tax Principles. These principles promote responsible tax management and ask companies to increase public understanding of tax by fully explaining the contribution they make and being transparent about their tax management policy. There are a variety of ways that we are seeing businesses achieve this, either through their financial statements, a separate report or on their website.

Tax paid by businesses and individuals provides a steady stream of revenues to fund high quality public services in the UK from recycling to roads, from the NHS to schools. In 2013/14, business paid £172 billion directly in tax, accounting for 30% of all HMRC revenues. HMRC needs to be able to collect the tax liabilities that are due and we support their initiatives to ensure that the tax owed by businesses is paid.

The vast majority of businesses comply with their obligations to pay taxes due, making major direct tax contributions through employers National Insurance, Corporation Tax and Business Rates. Beyond making a significant tax contribution to fund public services, businesses are also committed to ensuring everyone shares in the benefits of a growing economy, the CBI’s work in its recent report A Better off Britain setting out a range of solutions on how to raise living standards.

 “In 2013/14, businesses paid £172 billion directly in tax, accounting for 30% of all HMRC revenues.” 

The government does have a role to stabilise the economy through tax and public spending, particular when other levers to stabilise the economy, such as lowering interest rates, have already been pulled as far as they can go. However, sustainable public services are only possible through the government balancing its budget over the economic cycle.

Our ‘sustainable fiscal rule’, as set out in our report Our Future Public Services – A Challenge for Us All, is consistent with this – that, once the Government has balanced the books, public spending should not exceed tax revenues over the economic cycle. This allows tax and spending to play a role in times of economic difficulty, so long as the Government support is then paid for once the economy recovers. The alternative is ever higher public debt and ever higher debt interest payments which leave less space in the government budget for spending on much more productive things like science, education and health.

We believe that balancing the books over the economic cycle and ensuring public services remain affordable and effective are the key to sustainable public finances. Claims that the Bank of England’s ‘quantitative easing’ programme (printing money to buy Government bonds) provides a get-out-of-jail for unfunded public spending are misguided and risks ducking the tough but necessary decisions to reduce the deficit.

 “We are very aware that an honest conversation cannot mean just talking to yourself.” 

We are very aware that an honest conversation cannot mean just talking to yourself. That’s why we’ve invited opinion pieces and challenge from key stakeholders on all of our focus areas, including Richard Murphy as well as Oxfam and Christian Aid on tax, Joseph Rowntree Foundation and Resolution Foundation on pay and progression and Which? on how businesses treat their customers. Through social media and commenting, we are asking people to give us their views on business and where it needs to do more. We look forward to hearing the views of many others as the campaign continues.

 You can read Richard Murphy’s article on the tax debate here 

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