CBI wants tax cut for low paid

Monday 10 November 2014

A leading business group has revealed its "radical" blueprint for improving living standards, including raising the threshold when workers pay National Insurance, and expanding free childcare.

The CBI said the squeeze on household budgets over the past few years "cannot go on" for ever as it unveiled a series of plans for a Better Off Britain.

Director General John Cridland conceded that many of the recommendations could have come from trade unions, but business wanted economic growth to work for everyone.

Speaking ahead of the CBI's annual conference in London today, he said: "I want to see more low paid workers getting the benefit of tax reductions to help with their pay packets."

The Government could offer immediate help by raising the threshold of when people pay employee National Insurance to £10,500, which would increase take-home pay by £363 a year, and expand free childcare to one and two-year-olds, he said.

"The financial crisis and the slow recovery have hit people's finances hard. Living standards will gradually improve as the economy does, but growth on its own will not be the miracle cure. Even before the recession, the income of a child's parents determined too many of their own life chances.

"The UK needs to face up to some real long-term challenges. Changing skills needs, greater global competition and low social mobility mean for many the pathway to a better life is tough and far from clear.

"But the answers do not lie in short-term sticking plaster fixes, like intervening in pay or attacking the UK's flexible labour market, which will ultimately cost jobs. Instead, we need to invest in productivity, skills and education to make the best of Britain's talents."

The CBI said an average couple with two children saw their income fall by £2,132 a year in real terms between 2009/10 and 2012/13, while working families, those on low incomes and younger workers have found recent years the most difficult.

Katja Hall, the CBI's Deputy Director General, said childcare costs have increased by 27% since the last general election, stopping parents from working or increasing their hours. She outlined the CBI's call for 15 hours free childcare to be extended from three and four-year-olds to all children aged one and two, and extending maternity pay from 39 to 52 weeks.

Businesses should also adopt a presumption in favour of flexibility to help staff save on childcare costs, she said.

"Overhauling childcare in the UK would be a triple shot in the arm for our economy, raising family incomes, getting more adults into work and improving the life chances of many children. Many parents want to come back to work or put in more hours, but can't because of soaring childcare costs. It's ludicrous that the average working couple in the UK now spends over a third of their joint income on childcare."

The CBI said measures should also be taken to give people a financial "buffer", by increasing share ownership schemes and allowing people to save in an individual and corporate ISA.

Mr Cridland said: "One in five people have no savings whatsoever but having a buffer is essential when things go wrong. Firms can do more to help staff save and giving people a stake in the business can have real benefits, from lower staff turnover and increased employee engagement."

He added that tackling the deficit remained a priority, but the Government should be more "ambitious" in how to do it.

"It doesn't have to be cut and slash."

Senior politicians will address the 1,000 businessmen and women at today's event.