Ahead of the Budget on 30 October, ICAEW has reiterated its calls for action to ensure the long-term financial and regulatory stability needed to boost public and private-sector investment and ensure economic growth.

In a letter to Rachel Reeves, ICAEW Chief Executive, Alan Vallance, reaffirmed the need to redesign of the UK’s fiscal rules and change the current “flawed” measure of underlying debt that excludes quantitative easing liabilities. Such a move in the Budget would be the first step to support longer-term investment, he wrote.

However, ICAEW also warned that the Chancellor risked undermining market confidence if she acted too aggressively, particularly if changes were interpreted as indicating ‘a permanently higher level of indebtedness’.

While investors understand that borrowing for investment can produce significant benefits for the economy and public services, ICAEW argues that they want to feel confident that there is a coherent plan to ensure long-term stability.

ICAEW’s Director of Public Sector and Taxation, Alison Ring, explained: “It is crucial that the Chancellor proceeds with caution, as moving too quickly to a net-worth measure could see markets question the government’s commitment to put the public finances on a sustainable footing.”

In its full submission to government ahead of the Budget, ICAEW raised concerns over the experimental measure of net worth published by the Office for National Statistics and questioned whether it would provide a good foundation for a formal fiscal target.

Ring has also written to Darren Jones MP, the Chief Secretary to the Treasury,  confirming ICAEW’s position on the need to prioritise a long-term fiscal strategy and calling for changes to the way that government delivery capital investment.

Tax road map

Alongside highlighting the institute’s recommendations on fiscal measures, Vallance’s letter welcomed the government’s commitment to publishing a business tax roadmap, which ICAEW called for in its submission.

“This is the right time to tackle difficult issues, such as business rates reform,” he wrote. “A principles-based roadmap should also set out how the government aims to react to different scenarios. This will provide the certainty needed to enable ICAEW members who run and advise millions of businesses to put in place the necessary steps to achieve growth.”

Frank Haskew, Head of ICAEW’s Tax Faculty, has expanded on ICAEW’s recommendations on creating a “carefully calibrated tax policy” in his letter to the Exchequer to the Treasury, James Murray MP.

Haskew reiterates ICAEW’s call for a wider review of the UK’s tax system, as well as for action on tax simplification, improved HMRC service performance and the removal of “personal and business taxation cliff edges”.