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“The recent depreciation of Sterling alongside rising energy costs will be likely to contribute towards increased inflation which will eat into disposable incomes. In our view, this furthers the need for fiscal policies that encourage strong sustained consumer spending as a key pre-requisite to a strong economy,” explains Chas Roy-Chowdhury, head of tax at ACCA.
“In addition, the government would be well-advised to take fiscal measures to support Small and Medium Sized Enterprises (SMEs) and their ability to increase exports which will be crucial to the health of the UK economy in the post-Brexit era”.
In a letter to the Chancellor of the Exchequer, ACCA makes the following recommendations:
1. Stimulate consumer spending: pre-empt an anticipated slowdown in consumer spending with fiscal measures that protect disposable incomes and savings. On this basis, ACCA supports inflation-linked increases to the income tax personal allowance and higher rate threshold by the end of this Parliament.
2. Commission further expert advice:establish a ‘Fiscal Commission’of employers, professional bodies, experts and academia to inform policy-making, timed to coincide with the move to one fiscal event per year from 2017.
3. Long-term approach from government is essential as Brexit approaches: re-align the assumptions of the Comprehensive Spending Review with the impact of the Brexit timetable. Decisions based on a short-term electoral cycle will exacerbate the likely uncertainty caused by the UK’s exit from the EU.
4. SMEs are key to UK productivity: provide SMEs with the financing options to support increased export activity and further promote the activity of bodies such as UK Export Finance. Additional changes to the penalty systems relating to VAT and PAYE, to SME-focused non-payment insurance products, and to debt relief on PAYE and National Insurance Contributions for SMEs in the service sector are desirable.
5. Technological catch-up for the public sector: introduce incentives to encourage innovation in information sharing across the public sector. A lack of joined-up thinking on information and technology in public service provision risks inefficiency and waste.