Big business delighted with corporation tax cuts
Filed under: The Budget
Introducing his Budget as one which "unashamedly backed business," the chancellor announced a bigger-than-expected cut in corporation tax to 22p over the next three years. How has the statement been received by the business world?
Bigger businesses are, on the whole, quite happy with the Budget - smaller firms less so.
Tax stole the show
Tax has stolen the show, with further cuts in corporation tax, while the cupboard seems bare in terms of new spending initiatives to promote growth, said Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club. He described the statement as a "steady, but business-friendly, Budget". He added: "It is clear that the government is trying to improve the climate for business and it's now up to businesses themselves to deliver the goods."
After the huge spending cuts made in previous years, the government has moved on to reforming the tax system to stimulate economic growth.
Following reductions announced last year, corporation tax will be cut further to 24% in April rather than the expected 25%, falling to 22% by 2014. The chancellor claimed this was the the "biggest sustained reduction in business tax rates for a generation".
The enterprise finance guarantee has been expanded, and George Osborne announced the ambitious goal of doubling UK exports to £1 trillion this decade. Industry welcomed his plans to introduce an above-the-line research & development tax credit. There is also new funding for ultra-fast broadband for ten cities. Belfast, Birmingham, Bradford, Bristol, Cardiff, Edinburgh, Leeds, Manchester, Newcastle and London will bid for their share of a £100m "super-connected cities" subsidy.
John Cridland, CBI Director-General, said: "An extra 1% off corporation tax this year could make a big difference to investment intentions. With many calls on the chancellor to spend money he didn't have, the best news for businesses is that he stuck to his guns and delivered a fiscally neutral programme.
"If businesses were looking for more, it was in the area of deregulation. Businesses, especially smaller ones, will be disappointed that the chancellor did not do more to cut red tape.For smaller businesses, things may not feel very different on the ground."
Wallace and Gromit
TV drama, animation and computer game firms were delighted with the new tax breaks - designed to "keep Wallace and Gromit exactly where they are," Osborne said. The TV Coalition, which comprises some of the biggest names in UK and international TV production, said the tax incentive could "put an end to the exodus from the UK of dramas telling a British story". It added:
"Shows such as Birdsong, Strike Back, The Tudors, Camelot, Parade's End and the Julian Fellowes' drama Titanic, were all made abroad in countries including South Africa and Canada in the last year to take advantage of tax incentives."
More infrastructure improvements should also help, with Network Rail to upgrade lines in the north and plans to tackle the lack of airport capacity in the south east. This raised hopes of more runways at existing airports, or perhaps a new airport in the Thames Estuary.
However, some, especially smaller firms, were disappointed that Osborne refused to scrap the planned rises in fuel duty. Fuel duty will go up by 3.02p a litre in August. Vehicle excise duty will rise in line with inflation, but has been frozen for road hauliers.
Saurav Chopra, chief executive of daily deals for businesses site Huddlebuy.co.uk, was not at all impressed with the Budget.
"Corporation tax cuts do nothing to help the millions of smaller companies that are struggling to survive. How is this going to help them invest more money back into their businesses and jobs?
"The chancellor claims to unashamedly back business. He should be ashamed of himself for not doing more to help businesses with soaring fuel costs."