By Daniel Hunter
The decision of Moody's credit rating agency to remove the UK’s AAA credit status could have a profound impact on the City of London as one of the worlds top financial centres.
The Chancellor George Osborne should take urgent action to stimulate the economy - and the best way to do that is slash corporation tax. The Federation of European Employers (FedEE) reports:
The Secretary-General of The Federation of European Employers (FedEE), Robin Chater, today reproved the UK government for not taking earlier action to avert the decision of Moody's credit rating agency to remove the UK’s AAA credit status.
“The Chancellor George Osborne has been far too concerned with admonishing the City of London financial institutions for the LIBOR debacle and international companies for seeking to minimise their tax liability," said Chater.
"This is a government of parochialism and caution where the bigger picture has been lost in a fog of pettiness. The licence for greed of the 80s and 90s has turned into a culture of envy in which income distribution is far more important than the generation of the wealth that gives rise to the income. The present coalition government has silenced its opposition by becoming the best Labour Government since that presided over by James Callaghan — and equally inept.
"The downgrading of the UK’s credit status is a blow for the UK as a leading financial centre and the UK balance of payments is so reliant on its financial services that even a small loss in trading income could affect the value of Sterling and have a major impact on GDP.
"Regaining international confidence by further government spending cuts is going to take far too long to affect the economic fundamentals and could harm public confidence if it reduced the quality of public services.“
According to Chater there is only one course open to George Osborne and that is "to focus on economic growth and the key to growth — and the UK’s huge balance of payments deficit in goods — is to focus on manufacturing. The UK could regain its manufacturing strength quickly if the UK established the right climate for investment. Such a climate will not be achieved if the government remains preoccupied with corporate tax avoidance.
"That is why I am calling on the business community to support The Federation of European Employers (FedEE) in pressing for a simple plan that will achieve a rapid increase in corporate investment and create more than a million jobs in the UK. In fact, the plan is so simple it is all too obvious if only the economic debate could get away from its current puritanical preoccupations.
"In the Chancellor’s Spring budget he would announce that for every increase in PAYE income tax collected by companies from its emloyees the company would be able to reduce its corporation tax by an equivalent sum — provided that at least 95% of the increased PAYE revenue arose from an increase in jobs. To sustain the momentum half the corporation tax reduction could be retained provided that job levels were maintained within a narrow +/- 1% band.
"But even governments in such dire need of ideas as the present one will not take action unless there is a ground swell in favour of the FedEE plan. That is why employers must speak with one voice and challenge for change.”
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