The Confederation of British Industry (CBI) has called on the Chancellor to reduce public spending in order to stop the slide in Britain's tax competitiveness.
Even a small restraint in the pace of spending growth would be enough to halt the decline and mean that business taxes could be reduced in the coming years.
The CBI suggests that real terms public spending growth should be held back at 2.3 per cent rather than 2.7 per cent in the 2007/08 period, and at 1.6 per cent instead of 1.9 per cent thereafter.
This would not impact on frontline public services but would send the right message to the UK business community, it said.
UK corporation tax is unchanged
Many EU countries have cut their corporation tax rates in recent years but the UK's has remained unchanged since 2000, at 30 per cent, causing many companies to relocate abroad.
In 1997, the UK rate was the third lowest in the EU-15, but now it is the sixth-highest. "On a wider view, our overall tax burden - at 10.2 per cent of GDP - is higher than four of our top five trading partners, including Germany," the CBI said in a statement.
Meanwhile, CBI deputy director-general John Cridland praised the government's recent decision on public sector pay.
© Adfero Ltd
