ICAEW POLICY PUBLICATION. A vision for a strong economy: PRIORITIES FOR THE NEW GOVERNMENT ICAEW S VIEW

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1 ICAEW POLICY PUBLICATION A vision for a strong economy: PRIORITIES FOR THE NEW GOVERNMENT ICAEW S VIEW

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3 A VISION FOR A STRONG ECONOMY The next Government has the opportunity to build a stronger and more inclusive economy and to make the UK, quite simply, one of the very best places in the world to do business. With that in mind we are setting out a series of recommendations in six major areas of policy, which we see as critical for the future success of business in Britain. 1 Empower the UK s business community 2 Make Brexit a success 3 Build trust in business 4 Build a taxation system that works for all businesses 5 Make Whitehall fit for purpose 6 Invest in an agile and adaptable workforce While the exit from the European Union will present enormous challenges, it also makes it necessary that the UK fundamentally re-assesses its position in the global economy. Drawing on the insights and experiences of 147,000 ICAEW Chartered Accountants, many of them based in the UK, we have laid out the priorities which we believe the next Government must address if Britain is to maintain a leading position in a world of strong economies. ICAEW members are business and finance leaders, committed to the public interest and to the long-term benefit of the UK economy. We believe that companies and governments should focus not just on the next financial quarter but on the next quarter of a century. Michael Izza Chief Executive ICAEW 3

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5 A VISION FOR A STRONG ECONOMY 1 EMPOWER THE UK S BUSINESS COMMUNITY We are confident that it is within the power of the next Government to make a small number of key changes in the business environment which will have a major impact on the ability of smaller companies in particular to grow and succeed. 1 Promote access to quality advice Empowering the UK s SME community to scale up and stay competitive should remain a policy priority. This means that alongside continued provision of investment funding, the Government needs to direct public funding to help connect professional advisers to fast growing companies and private sector expertise. 2 Step change in SME trade The Government should incentivise SMEs to start exporting by providing early stage export advice. We recommend the introduction of an export voucher, which would fund professional export advice delivered by the private sector to help them enter international markets. Another means of enhancing SME access to international markets would be a comprehensive programme of investment in high speed internet access across the country, including outside the major urban areas. 3 Enhance SMEs access to finance In spite of the steady expansion of Enterprise Capital Funds, the population of Series A investors in the UK is small and fragmented. Currently, EU originated programmes, in particular the European Investment Fund, represent a key source of SME funding. The next Government must make sure that this is renewed or replaced after 2020 to avoid venture capital from drying up. 5

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7 A VISION FOR A STRONG ECONOMY 2 MAKE BREXIT A SUCCESS According to recent ICAEW research, the UK s trading relationship with the EU is worth more than 400bn per annum, or 52% of the total trade in goods and services. As the UK Government embarks on the process of negotiating a new relationship with the EU, it should play to the strengths of the UK economy and aim for a deal that will ensure British companies and professional services providers can continue to be valued business partners right across the European market. 1 Protect market access Maintaining mutual recognition of regulators and regulatory coherence to protect and enhance market access must be a priority. Achieving this in the financial and professional services sectors will be crucial to the UK s ability to maintain access to EU markets. This new mutual recognition should focus on regulatory outcomes, as opposed to processes, to allow the UK and the EU to continue to innovate in regulations. 2 Safeguard the movement of skilled labour The Government must establish an immigration policy that allows the UK s strongest sectors to easily access and deploy talent in an efficient manner, regardless of residency or location of work. 3 Ensure UK qualifications are recognised across the EU The Government must push for an early agreement that continues to recognise the status of UK auditors, accountants and other professional qualifications. Failure to secure a similar regime would threaten the UK s pre-eminent role in accounting and audit in the EU market. 7

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9 A VISION FOR A STRONG ECONOMY 3 BUILD TRUST IN BUSINESS The UK operates in a competitive international environment. To secure and strengthen Britain s global standing as a place to do business, the Government must build a regulatory framework that delivers world-leading accountability and transparency from companies without deterring foreign investment. Building public trust in business will take time, and it will require businesses to be receptive to feedback, to have the confidence to respond to criticisms frankly and to change direction if it is impossible to justify behaviour. 1 Publish pay ratios Publishing pay ratios which put executive pay levels into context would be an effective way of generating an informed public debate about executive pay. 2 Modernise boards The Government needs to modernise the legal duties which apply to directors and be willing to hold any and all to account when things go wrong. 3 Include private companies ICAEW supports the introduction of a code for economically significant private companies. This would require a comprehensive and inclusive consultation on how economic significance is determined in a wider context. 9

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11 A VISION FOR A STRONG ECONOMY 4 BUILD A TAX SYSTEM THAT WORKS FOR ALL BUSINESSES A good taxation system needs to be simple, certain and consistent. The complexity of the UK tax code undermines confidence, inhibits economic growth and allows for unacceptable tax behaviour. This General Election and Brexit provide an opportunity for the next Government to simplify the code radically while setting an example which will influence the rest of the world. 1 Commit to a stable and simplified tax system that encourages investment and growth The UK tax system has become far too complicated and tax legislation gets longer every year, increasing compliance costs. This will be an issue after Brexit, when the UK will need to be even more successful in attracting overseas investment and trade. Businesses need a simple and certain tax system so that they can plan their growth properly and investors can have the confidence to invest for the long term. 2 Ensure that a digital tax system puts the needs of businesses first Currently the Making Tax Digital proposals are being rushed with insufficient consideration given to the associated administrative burdens and costs. Businesses should be at the heart of the design and implementation of the new system. Adequate time needs to be given for pilot schemes with a review of the appropriate level for exemption from quarterly reporting, which we recommend should be set at the VAT threshold. 3 Support innovative thinking for a modern economy A tax system that is fit for purpose will need to take account of the changing nature of the UK economy. The sharing economy is a cultural and environmental phenomenon that is growing so quickly that many taxpayers may not fully appreciate their tax responsibilities. Tax education is essential to help the public comply with their obligations. Contributions from HMRC and sharing economy platforms would help to achieve this. 11

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13 A VISION FOR A STRONG ECONOMY 5 MAKE WHITEHALL FIT FOR PURPOSE Strong public finances are essential to deliver the investment in skills, systems and infrastructure for a country that works for everyone. The next Government needs to look at how it can generate revenue from its assets and deliver the next generation of productive infrastructure. The Civil Service also needs investment, to ensure it is equipped with the skills and capabilities it will need to manage the complexity of Brexit while delivering on the Government s domestic agenda. 1 Make infrastructure decisions more efficiently The UK needs to invest in infrastructure that has the potential to generate growth and a positive return to the taxpayer, such as investment in world-class digital technologies. Connectivity is increasingly vital for businesses to grow and compete in a global environment. Digitalisation also helps streamline public services and render them more transparent. Strategic oversight of an Infrastructure Delivery Group could help create the resources to ensure these projects are completed on time and on budget. 2 Generate income to invest in the economy while paying down the National Debt Now is the time for a review of Government assets and a sweating of those assets. While national government is not a business, a more commercially-minded approach could allow the Government to raise revenue. Real estate, movable property and licenses of intellectual property rights are all assets that can be identified and valued in a way that could increase business. Capital spending is not simply a cost but an investment that delivers a public service and revenue. 3 Ensure the right mix of skills to navigate the complexity and demands of Brexit Delivering successfully on both Brexit and a domestic agenda represents one of the most complex tasks ever faced by a UK Government. Ensuring the Civil Service has the capability to adapt to this is a key challenge. Yet it is widely acknowledged, not least by Government itself, that the Civil Service lacks commercial acumen and technical skills. Both a full appraisal of the professional skills needed to deliver effective and efficient Government in the 2020s and a complete re-think about the training, reward and career structure for civil servants are needed. 13

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15 A VISION FOR A STRONG ECONOMY 6 INVEST IN AN AGILE AND ADAPTABLE WORKFORCE Improving the UK s skills base is necessary to improve productivity and living standards, enabling people to access skilled jobs and higher wages. Alongside poor performance in the areas of basic numeracy and literacy, the UK has lagged behind competitors in developing a world-class technical education system. To uplift skill levels in the UK, the next Government must address these issues. 1 Develop skills employers are looking for The previous Government s Post-16 Skills Plan and Higher Education Bill together represent an ambitious proposal to introduce a teaching framework aimed at increasing graduate employability. These programmes should be accelerated: they will support the provision of skills needed in the workplace, as employers are now looking past academic results and towards competency-based skills. 2 Boost the status of technical educational programmes and apprenticeships Apprenticeships should be placed on an equal footing with higher education. Implementing the previous Government s decision to integrate technical education and apprenticeships into the Institute for Apprenticeships and Technical Education is a major undertaking. The challenge is to ensure that there is necessary funding to deliver a high quality system and that there is a strong commitment to improve the provision of technical and basic numerical skills. 3 Include a stronger element of place in skills policy, to close regional disparity Developing centres of excellence or minimum levels of support for strategically important sectors such as professional business services is essential to realise the economic potential of the UK s regional economies. Educational and training provision need to take into account the significant regional differences in the availability of skills. Just as employers are investing time and money into training their employees, the Government and educational institutions must do the same so that there is a mutual and cohesive implementation. 15

16 ICAEW connects over 147,000 chartered accountants worldwide, providing this community of professionals with the power to build and sustain strong economies. Training, developing and supporting accountants throughout their career, we ensure that they have the expertise and values to meet the needs of tomorrow s businesses. Our profession is right at the heart of the decisions that will define the future, and we contribute by sharing our knowledge, insight and capabilities with others. That way, we can be sure that we are building robust, accountable and fair economies across the globe. ICAEW is a member of Chartered Accountants Worldwide (CAW), which brings together 11 chartered accountancy bodies, representing over 1.6m members and students globally. ICAEW Chartered Accountants Hall Moorgate Place London EC2R 6EA UK T +44 (0) E contactus@icaew.com icaew.com ICAEW 2017 EXEPLN /17