Ahead of the Budget on 30 October, ICAEW has published its submission to government outlining the actions it believes are necessary to deliver the Labour Party’s commitment to boost economic growth.

A long-term fiscal strategy that puts the public finances on a sustainable footing, coupled with a business tax road map covering at least the next five years and a plan to position the UK as the world’s green finance capital, will boost the confidence of organisations to invest.

Alongside clarity over policy direction, particularly over the reform of business rates and VAT, the government must also take practical steps to enable the country to grasp the opportunities offered by digital and green technologies. ICAEW’s recommendations include: 

• committing to regular support schemes to upskill workers on artificial intelligence,
• reintroducing growth vouchers for small businesses, and
• developing a net-zero investment tracker to assess the impact of Budget measures on the environment.

The Chancellor must act quickly to provide stability and certainty, says Alan Vallance ICAEW’s CEO. “The first Budget of a new government is a golden opportunity to take the big decisions needed for the long-term. Reviewing the tax system should be a clear priority for Labour, and reforms to VAT, employment status and business rates, which are not currently conducive to economic growth, should be central to this. 

Both public and private investment is needed now to build the long-term growth that is essential to the UK’s future prosperity, according to Vallance. He says: “The government needs to take a holistic view and ensure that industrial, trade, tax, investment and skills strategies are integrated and have aligned objectives and outcomes. It is key that government investment enables private sector additionality, as part of a whole economy approach.”

Amplifying members’ voices

The submission draws heavily on ICAEW’s Manifesto. Published at the start of 2024, the manifesto offered a range of recommendations to the next government based on the experience and knowledge of members.

The document submitted to the Chancellor reiterates many of those key messages while taking account of the Labour Party’s commitments for economic growth.

To secure growth, the government must make it easy for businesses to be created and grow ICAEW argues. Streamlining and integrating HMRC registrations with Companies House verification is one suggestion, bringing forward the Single Trade Window to remove export barriers for SMEs is another.

ICAEW also recommends that the government should set out its plans to reform employment status before 2025 and take action to ensure research and development tax reliefs are cost-effective and easy to use, particularly for smaller claimants.

Public sector finances

Growth will not be possible without stable public finances, according to ICAEW. Together with focusing on long-term fiscal policies, the government must replace the current, flawed measure of underlying public debt. ICAEW argues that without taking into account quantitative easing liabilities in public debt, it won’t be possible to redesign fiscal rules to support long-term investment.

Making such a change would avoid independent decisions of the Monetary Policy Committee on quantitative tightening (QT) inadvertently affecting fiscal choices. Redesigning fiscal rules “…could send a strong signal to international investors that the new government wanted to see investment in infrastructure over the long-term”.

Public investment must then focus on technology and transformation of public services to improve their quality and cost efficiency, according to ICAEW.

Looking to the long term

The submission goes on to focus on the actions that the government should be considering in this Budget to secure growth in the long term. One of the key priorities must be to ensure the robustness of public institutes and finances, with ICAEW urging greater transparency on financial information and recommending the creation of a Budget Committee to scrutinise tax and spending proposals.

The government must also deliver on its timeline for clearing the backlog of local audits and conclude its reviews on anti-money laundering and non-financial reporting.

Meanwhile, action to support investment and international trade is also needed. ICAEW reiterates its position that the government should commit to a minimum target for R&D investment of 3% of GDP and set out a vision for the trade of professional services.

• Read more on ICAEW's tax recommendations
• Read ICAEW's Budget submission in full