Mary Poppins

The Institute of Directors (IoD) has called on the Chancellor George Osborne to deliver a 'Mary Poppins' Budget next week.

The organisation of business leaders says Mr Osborne needs to add a spoonful of sugar

“The Chancellors’ medicine will certainly taste bitter for businesses,” said Simon Walker, IoD director general, “but we are far from convinced it will produce the desired result”.

The IoD is concerned about the impact measures being brought in in the near future will have on businesses. April will see the introduction of the National Living Wage - a new, compulsory, higher wage of over 25-year olds - the Apprenticeship Levy, and an obligation to enrol staff on pension schemes.

According to the IoD, just 9% of business leaders say the Apprenticeship Levy will help them to recruit more apprentices. And a third of those surveyed said they would need to pass on the costs of the Levy to staff in the form of lower wages, or onto customers.

While the IoD supports the motivation behind the National Living Wage, official analysis suggests it could lead to 60,000 job losses. The requirement for employers to give staff workplace pensions, which will effect up to half a million small and micro employers this year, also carries risks. So far, the Pensions Regulator has fined around 5,000 firms for non-compliance, half of these fines being handed out in the last three months of 2015. As the obligation hits the smallest companies in 2016, the ones least able to handle the red tape, the IoD expects the number of fines to increase.

Soften the blow

The IoD is calling on the Chancellor to return Annual Investment Allowance (AIA) to £500,000, after it was cut to £200,000 last year. Only 3% of IoD members said AIA is high enough to encourage more investment, compared to 20% who say it is actually making them reduce investment.

With the government planning to raise the 40% tax rate threshold to £50,000 by 2019/20, the IoD wants George Osborne to raise it by at least £2,000 this time around, and set out a path explaining how and when it will achieve the £50,000 mark in three-to-four years time.

Simon Walker added: "Business needs the Chancellor to offer up a spoonful of sugar to help them swallow the extra costs in terms of taxes and regulations. To make it more palatable, George Osborne must take the opportunity offered by the Budget to reverse the cut in investment incentives, reduce tax on middle earners, and get rid of the absurd kink in the tax system, which sees tax on income shoot up to 62% at £100,000.

"Beyond the need to lessen some of the immediate pain, the Chancellor should also take this chance to begin genuine and bold simplification of the UK's tortuously complex tax system. This will be no simple task, so if he cares about leaving the tax system in a better condition than he found it. He must start now."