CBI chief Carr fires broadside at UK’s ‘punitive’ tax regime

In his first major speech in Scotland since taking up the post in June, he told his Glasgow audience that the Treasury’s “misguided” levy on North Sea production had weakened investment and could eventually further raise the price of oil and gas in the UK. He also called for a reduction in rates of personal taxation, which should not “just be replaced by a damaging property tax”.

Carr told CBI Scotland’s annual dinner: “The UK needs motivated entrepreneurs, and it’s a fantasy to think that highly-mobile, talented people will forever tolerate some of the most punitive tax rates in the developed world.”

Addressing an audience of about 600, which included Chief Secretary to the Treasury Danny Alexander, he said: “We need less regulation, more public service reform and a faster pace on infrastructure development and renewal, and we don’t need these by the end of the parliament – we need them now.

“Above all, the government must not be deflected from its core task of repairing the public finances. It remains the bedrock of our global financial credentials and our recovery momentum.”

Despite these strong words, Carr said in an earlier interview with The Scotsman that the CBI had no serious disagreement with the coalition’s fundamental policy of financial discipline and restoring growth. Though reforms to the public sector should be accelerated, most of the sticking points between the two sides centre on timing rather than substance, he said.

“There is absolutely no doubt that we are on the same page in pursuing economic growth,” Carr said. “We are not always on the same line, however.”

This has been most evident during this past week’s clash over banking reform, which kicked off with CBI director-general John Cridland claiming that the forced separation of retail and investment banking operations would put economic recovery at risk. Cridland said earlier this week: “Taking action at this moment – this moment of growth peril, which weakens the ability of banks in Britain to provide the finance that businesses need to grow – is just to me barking mad.”

Business Secretary Vince Cable initially hit back at those claims, saying that such talk was “disingenuous in the extreme”. However, Cable has since softened his stance, and it now appears that the more stringent capital requirements this will impose will not take effect until 2015 at the earliest.

Speaking before last night’s dinner, Carr described the 2015 target as a “more thoughtful position as things stand today”.

“There is no challenge to the principle – the issue is timing of enforcement,” he said. “The balance is growth, and growth has to stay at the top of the agenda.”

He was equally keen that the government keeps up the pace of reform, arguing that hiccups in the recovery made the case for action more rather than less pressing. Rebalancing the economy away from the state sector must remain a top priority.

“In Scotland, public spending rose 50 per cent between 1999 and 2006,” he said. “Even after the job losses, public sector employment in Scotland will be 10 per cent above the UK average. That’s an over-reliance that must be tackled.”

Retiring chairman of CBI Scotland Linda Urquhart, said key challenges remain. “There are positive signs of public investment in infrastructure, but our members have an overriding concern about affordability and sustainability in public spending.”

COMMENT, PAGE 4