THE Chancellor’s mini-budget should boost economic growth, according to the chief economist of the Institute of Directors.
Asked if the measures would kick-start growth, Kitty Ussher told GB News: “Well, that’s the million dollar question. There’s certainly loads to welcome here.
“Reversing the increase in National Insurance, that will be welcomed if you’re a taxpayer, but it’s also particularly welcome to those businesses who had to find the money to pay the employers’ National Insurance contribution.
“That’s like a flat tax on employing people regardless of whether you’re profitable or not, so that’s extremely welcome.
“Obviously, the most publicized decision not to raise corporation tax is extremely welcome.
“The investment zone idea is really interesting, and it’s well targeted in order to drive regeneration as part of a leveling-up agenda and for those parts of the country that have found it so hard to attract investment and economic activity.”
She added: “That’s very exciting and particularly the commitment to have 100% tax relief on capital investment there as well. But there’s a few notable gaps…
“We were hoping for a permanent extension to the so-called Super deduction 120% tax relief on capital investment, which is basically paying firms a little more, paying some of the costs back when they undertake capital investment.
“…using the tax system to incentivise training in the workplace, encouraging firms to do that through the tax system and that that kind of wasn’t there, unfortunately,
“But overall, it is very hard to oppose what we’ve just heard because it was all on the spending side, there was absolutely nothing about whether taxes had to rise to in some other area to pay for this.
“If the government’s got it right, this will lead to an acceleration of growth, obviously, that’s in everyone’s interests.”
Ms Ussher added: “There are some things that have been announced that will reduce inflation and not just capping the price of energy, but also reducing business costs will mean that they won’t pass through those costs to prices.
“That dampens down inflationary pressures, but if you think inflation is coming from there being too much demand in the economy and we can’t supply things fast enough, then going for growth is an inflationary force.
“…now you’re in a situation where inflation has been come kind of baked into the economy that everyone’s expecting prices and wages to rise, then actually you might get to a situation where if the Bank of England continues to be very determined to bring it down, but people will begin to believe that it will come down and then you can get growth with low inflation.
“But at this point, it’s really hard to judge which way that will go. So I would say it’s potentially risky, but that doesn’t necessarily lead to higher inflation.”