The IoD warns that we are on the verge of becoming “seriously uncompetitive” and it call for an immediate reduction in company tax from 30% to 28%.

The OECD average for business tax in developed nations now stands at 29.1% and the UK now ranks seventh highest when six years ago it was amongst the lowest. European nations in particular have reduced their company tax burden while the UK has stood still. Ireland now has a rate about half that of Britain.

The IoD believes that lower business taxes could be achieved by reducing public spending from its current 42.5% of gross domestic product (GDP) – up from 37.1% since 2000.

ECONOMIC PARTNERSHIP COMMENT

The Treasury has previously signalled that growth in public spending will be capped at 2% in the comprehensive spending review (CSR) expected in summer but the Chancellor has recently hinted that it may be even lower than this figure – possibly as little as 1.6%.

However, the Chancellor is unlikely to cut taxes. A few months before he is likely to succeed Tony Blair as Prime Minister does not make for an auspicious time to reward businesses with tax concessions even though they will help to generate jobs.

Also he will be tempted to pay more attention to the International Monetary Fund’s recent assessment of the UK economy, which was glowing, and the Price Coopers Waterhouse report that predicts that over the next 16 years, thanks to booming financial services, London’s GDP will grow faster than Tokyo, New York, Los Angeles, Chicago and Paris.