“They [companies] can’t pass that on, the most they can try to raise their prices is, say, 10%, but if they absorb input costs that go up 30%, 40%, 50%, they’re in a hurry.
The answer, he argues, must be tax cuts to mitigate the recession: “It may be too late to avoid it, but if we act quickly, we can significantly minimize its impact.”
Deeper fuel tax cuts would help – the 5p slash so far ‘isn’t even a drop in the bucket’ – while money to cut energy bills should be more targeted.
Bilimoria wants the VAT to be reduced again for hospitality, replicating the pandemic measure which reduced the tax from 20% to 5% before being fully reinstated in April.
“We need the VAT cut now to help us and consumers – the government can help more right now,” he says, praising actions “that helped save businesses” in 2020 and 2021.
“The danger of not helping is much worse than the cost of helping,” he says, warning of more “failing businesses and bankrupt individuals” in a deeper recession.
At the very least, Bilimoria wants Rishi Sunak, the chancellor, to stop escalating the situation.
“Having the highest tax burden in 70 years, I think is absolutely wrong,” he says.
“It is absolutely wrong to raise corporate tax all at once from 19 to 25%. National Insurance is a tax on jobs – to increase that by 2.5% which affects both employers and employees with 1.25% [each]it’s the wrong thing to do.
“Now is the time to cut taxes to generate investment and generate growth, because that’s what’s going to get us out of this.”
Many of them are his personal campaigns. The CBI’s main official target is a successor to the 130% investment super allowance that ends in March. The policy gives companies a 25p reduction in their tax bill for every pound invested in certain types of industrial facilities.
The business group, which is in talks with the government on a permanent replacement scheme, favors a 100% deduction for capital investments to stimulate long-term spending.
Sunak indicated something would be forthcoming in the fall budget, although the lack of urgency frustrates Bilimoria who wishes it had been announced in the March spring statement.
The super deduction “could have been used even more if companies knew this was going to continue”.
“Fortune smiles on the daring,” he exclaims, pushing the painting away to emphasize this point.
“You have to be bold in these times. They were bold during the pandemic, borrowing £400billion and helping save the economy – that hasn’t changed, we still have to save the economy.
The pandemic has shown that the state can be agile when needed and Bilimoria is keen to apply this in any area.
This includes Brexit (a solution to Northern Ireland’s trade problems is “very possible” with “the equivalent of a green and a red [lane] at customs” for declarations), energy (“small modular nuclear reactors can be built in four to five years, why not start working on them right away?”) or even humanitarian crises (he called companies to send oxygen to Indian hospitals last year and food to Ukraine after the Russian invasion).
The peer says Covid has reforged Tory ties with the CBI which were ‘not great during the whole Brexit period’.
His own experience as a parliamentarian as well as his contacts in the political world played a role. He describes him and Michael Gove as long “adversaries but also very great friends” since Bilimoria ran the Cambridge Union at the same time the current Secretary of State for Leveling Up ran his Oxford counterpart.
But the key was dealing with the pandemic, evoking emergency policies such as furlough, which came just before Bilimoria took the role in June 2020.
As a result, he says CBI has a direct line to government departments to report issues and propose new policies.
The test will come in the fall, however, when the CBI – under Bilimoria’s successor Brian McBride – finds out whether it gets the tax cuts it wants in the next budget.