QUITE a lot has been written recently, and in this column in particular, about the burden of corporate taxation and its effect on company decision-making.

With the company tax-take about £50 billion higher than it was in 1997, this is perhaps not surprising.

The CBI commissioned a report from a task force specially set up to examine whether the UK's corporate tax regime was fit for purpose in a world where the competition for inward investment is stiff and expected to intensify. The report said that four key principles should govern the corporate tax system: simplicity, certainty, flexibility and neutrality.

Competitiveness had to be the overriding priority and taxes must be kept low and simple. There should be a no-surprises' legislative and administrative process. Will the Government listen? Well, it has just set up its own forum to look at the problem, so that's a first step.

Aside from the realities of the UK's public finances, which now seem to be stretched to the point where the Chancellor can do almost nothing to compensate for the effects of adverse economic events, one of the fundamental problems we face is that of overactive government. You only have to spend a couple of years in, for example, France, Germany or Belgium, to discover how excessively energetic British governments are. And at the end of it, the benefits seem hardly commensurate to the preceding effort and disturbance.

Clearly, governments need to adjust the nation's laws to take account of changing circumstances, but the frenetic pace of law-making, under both political parties, over the years, has probably, in itself, placed British business at a disadvantage compared to many of our major competitors. Governments seem unable to realise that the ability of companies to keep up with, and to digest, the fierce pace at which new rules have been introduced to regulate different aspects of their activities can be quite limited. And the legislation just keeps coming.

The present government continues to trumpet the benefits of stability and predictability which have flowed from its macro-economic policy over the last 10 years, and yet it fails to realise that a flow of new measures covering the entire spectrum of a firm's activities is a source of uncertainty. It's as if there is a kind of systemic schizophrenia at the heart of the administration. And that doesn't bode well for the future.

  • Contact Steve Rankin at the CBI on 01252 360420