Easing the cost of living crisis through business tax cuts? Chancellor Rishi Sunak addressed business leaders at the CBI’s annual dinner last week, giving a speech that affirmed the role of businesses in the government's plan to ease the cost of living crisis. (Transcript here and video here.) A central part of the governments’ strategy is to use tax cuts to stimulate business investment: “higher productivity is the only way to raise living standards”, the Chancellor proclaimed.
The 'Super-Deduction' tax break. The Sun’s Harry Cole reports that the Chancellor may increase R&D tax allowances and extend tax breaks for investments in the Autumn Budget. The 130% ‘Super-Deduction’ on corporation tax, introduced in the 2021 Spring Budget, was pitched as a way of incentivising businesses to invest in more capital machinery, boosting innovation and productivity - branded “the biggest business tax cut in British history” by its supporters and the ‘Amazon tax cut’ by its critics.
Alternative industrial strategies to ease the cost of living crisis. Given that business investment actually fell by 0.5% in the first quarter of this year, there are growing calls from both Left and Right for alternative economic strategies to be considered both to address the immediate crisis and to put the economy on a path to higher wages and productivity.
Windfall tax U-turn? The FT reports that the Chancellor has ordered Treasury officials to “draw up plans for a possible windfall tax on more than £10bn of excess profits by electricity generators, including wind farm operators, on top of a hit on North Sea oil and gas producers.” This would go “well beyond Labour’s original windfall tax plan” but the government is yet to decide whether it will follow through or not. The development comes as pressure mounts from all sides for a windfall tax. Conservative MP and ex-Financial Secretary to the Treasury Jesse Norman is the latest to call for a levy, arguing that there are several precedents to a windfall tax and that it would not impact upon companies’ incentive to invest.
The REPowerEU plan. The European Commission has published its REPowerEU plan with a threefold objective: reduce dependency on Russian fossil fuels, accelerate EU transition to a clean economy, and increase the resilience of the EU energy system. Lucie Mattera, E3G’s Head of EU Politics, said that this ambition must be matched by support from ‘capitals and the European Parliament’.
Rate hikes a threat to energy transition. Green Central Banking’s Jamie Woolley argues that tighter monetary policy, as recently seen from the Bank of England and the Federal Reserve, is a threat to a green energy transition. He argues that higher rates will prevent investment in renewable energy, which are more capital intensive than fossil fuels and with much larger upfront costs.
Profiting from pain. As the global economic elite gather at Davos this week, Oxfam publishes its ‘Profiting from Pain’ briefing, highlighting how billionaires’ wealth increased more in the first two years of the Covid-19 pandemic than in 23 years combined. The charity states that a new billionaire is created every 30 hours, while nearly a million are pushed into poverty at the same rate. Oxfam’s Max Lawson has shared a graph demonstrating the steep rise in billionaire wealth and extreme poverty over the past two years.
Widening pay gap. The High Pay Centre has found that the CEO/worker pay ratio is now ‘increasing to new highs’ despite falling over the course of the pandemic. During the pandemic, the ratio between the median CEO and the median worker at FTSE 100 companies fell from 53:1 to 44:1 but is expected to rise over the course of 2022 with ratios the widest in the retail sector.
Gender equality and a just transition. The Women’s Budget Group has published the latest policy paper in its Feminist Green New Deal series: Labour Market Changes for a Green, Caring Economy. The paper argues that the ‘greening’ of jobs needed for a just transition will have gendered impacts. Its recommendations include a shorter working week as well as a free, universal childcare service to ensure maximum accessibility to green jobs.
‘Fiscally neutral’ UBI. Compass has published a report on a fiscally neutral model of Universal Basic Income that could “reverse the poverty and inequality rises of the last 45 years”. Authors Howard Reed, Stewart Lansley, Matthew Johnson, Elliott Johnson & Kate Pickett found that the cost of the extra payments could be exactly offset by the extra revenue from internal changes in tax rates and National Insurance Contributions (NICs).
Food insecurity. The ongoing invasion of Ukraine will exacerbate global food shortages and could leave 1.6 billion people without enough food. Russia and Ukraine supply 28% of globally traded wheat, 29% of the barley, 15% of the maize and 75% of the sunflower oil, but Ukraine already shipped much of last summer’s crop before the war and farmers have nowhere to store their next harvest. The Economist argues that countries must work together and keep markets open but also that substitutions can be made (huge amounts of exported grain is used to feed livestock).
New Right to Buy policy. New Economics Foundation’s Simon Hill explains why Boris Johnson’s extension of Right to Buy to housing associations is not the answer to the housing crisis. It is estimated that the Right to Buy scheme has led to the loss of £75 billion to the public finances since 1980 through the sale of social housing at discount rates.
Scottish community wealth building and just transition. Common Wealth’s Miriam Brett and IIPP’s Laurie Macfarlane explore the effects of community land and asset ownership in Scotland on achieving a just transition to net zero. Their paper recommends strengthening the Scottish Government’s stated Community Wealth Building ambitions by scaling up public acquisitions of land and exploring the possibility of a new National Wealth Fund.
Co-ops in Bologna. Pietro Ghirlanda explores how Bologna may be set to become ‘the Italian co-op valley’ and explores how the city promotes the establishment of platform cooperatives and ‘a chance to rethink the social contract’. Ghirlanda argues that municipal institutions, such as that of Bologna, must act as ‘top-down catalytic developers or as backers of bottom-up grassroots movement’ to promote the cooperative movement.