CBI seeks tax reform review

The CBI has urged the government to review taxation rules and regulation for public services over fears that reforms are not functioning as intended.

A report form the CBI has warned that the government is risking the future success of public service reforms because of "unfair tax rules and muddled regulation."

According to the report, current rules provide perverse incentives to avoid tax and may prevent effective reforms to the UK's public services.

The CBI is calling for a full inquiry to prevent flaws in the system damaging economic efficiency and holding back much-needed service improvement.

The new report, A Fair Field And No Favours, looked at areas where public, private and voluntary sector providers compete, and focuses on public services such as health, education, social housing and local authority support services.

It argues the current system lets some providers compete with an unfair advantage and damages the quality of services and the value for money the taxpayer gets.

CBI Deputy Director-General John Cridland said: "The private, voluntary and public sectors have all raised this as an issue, so the system clearly isn't working as it should. This may prevent the government making the best possible use of all providers, hampering its ability to achieve effective reform.

"There is also a real danger providers will create structures for artificial reasons to get around arcane rules governing market entry, rather than creating partnerships that add public value."

He continued: "The CBI supports the creation of a mixed economy in public services. The public can only benefit if there is greater diversity and contestability in the provision of services. But a mixed economy can't succeed if the rules aren't fair for all providers. The government needs to address these issues of bias now."

The CBI has joined voluntary and public providers in calling for "competitive neutrality."

(SP/KMcA)