Osborne’s policies are no April Fool

George Osborne's corporation tax policy - lauded today by Conservative Home - would lead to cuts in crucial investment allowances. And a 20% rate would cost £4.3bn.

Conservative Home are today setting out “ten good reasons why we can support the Conservatives with enthusiasm.” Top of the list is George Osborne, prompting Labour List editor, Alex Smith, to tweet, “Wow, April 1st already.” But the justification – lowering corporation tax – is not something to laugh at.

Tim Montgomerie writes:

“George Osborne will use his first budget to cut the headline rates of corporation tax by abolishing allowances. As part of his ambition to make Britain an international headquarters for business and to “improve Britain’s international rankings for tax competitiveness and business regulation” he wants to continue to cut corporation tax in budget-after-budget. Tory Treasurer Michael Spencer has spoken of a corporation tax rate of 20% by the end of a first Parliament.”

The ‘Tax ready reckoner and tax reliefs‘ guide (Table 5) which accompanies the pre-Budget report sets out that the proposed 3 pence cut in corporation tax and 2 pence cut in the small companies rate would cost £3.2 billion in 2011-12 and £3.7 billion in 2012-13. To pay for it, Osborne proposes (p. 8-9) abolishing the £50,000 annual investment allowance; reducing general plant and machinery capital allowances to 12.5 per cent; and reducing long life plant and machinery capital allowances to 6 per cent. With business investment continuing to fall off a cliff, it is not surprising that the manufacturers’ lobby group, EEF, say:

“the importance of capital allowances cannot be underestimated.”

Cutting corporation tax by a further 5 per cent, as Spicer suggest, would cost an additional £4.3 billion on cautious estimates (i.e. if the projected 2012-13 loss was the same in subsequent years). As Left Foot Forward has shown, Spicer’s company would benefit to the tune of £22.5 million. Spicer did not set out which public services he would propose cutting to pay for this ambition.

George Osborne may be a joke but his policies, sadly, are not.

18 Responses to “Osborne’s policies are no April Fool”

  1. The Parallax Brief

    There are several arguments in favour of cutting corporation tax: Foremost of which is that businesses create jobs, and if we could attract more to the UK, or reduce the tax burden on those already here to the extent that they would have more cash with which to expand, that would mean more jobs. But the concept of somehow clawing that back from smaller businesses through hacking away at their investment allowances seems completely wrongheaded.

  2. Henry

    This sounds familiar; the Tories are proposing to punish manufacturing spo as to help their banker & Big Biz friends.

  3. Anon E Mouse

    Henry – Considering Gordon Brown was the man who deregulated the banks, Lord Sainsbury is a Labour peer and Rover was allowed to go bankrupt under this Labour government I think your comment is infantile and not thought through.

    Any chance we can have some pro Labour comments and less silly anti Tory ones?

    We are about to go into an election and despite how totally inept this current government is any floating voters would be put off by your ill judged remarks.

  4. Mr. Sensible

    Anon E Mouse, Labour deregulated the banks?

    Consider:
    1 Under a Tory government, Meadowhall came in to being on the sight of a former steelworks; that’s where our manufacturing went.
    2 Before the economic situation, Cameron et al were calling for less, not more, regulation.

    Could the government have regulated the banks more? Yes.

    But, it’s a bit rich of the Tories to say that.

    Oh and, is this not the same Conservative Home blog that was clutching at straws to find 100 reasons why Bo Jo was good for London?

    I think I could only find 1 or 2 that were actually of any use to Londoners!

  5. Thomas Byrne

    Does Left Foot Forward not consider a reduction on tax for -all- businesses better than giving tax breaks to specific groups?

  6. TVI Pay It Forward

    Osborne's policies are no April Fool | Left Foot Forward http://bit.ly/cGrCnb

  7. rob

    Is lower tax on corperations not a good idea if it means britain can attract jobs. More industry, more jobs, more companies and individuals paying tax.I get the argument that it would put too much of a hole in the budget but this article seemed to be intensly personel for a supposedly evidence based blog.

  8. Henry

    Anon: I don’t think my comment was facile at all. I used to run a manufacturing business & know that capital allowances etc are important. The Tories just want to do away with them so they can reduce the headline corporation tax.

    This is either cheap politics – or, as LFF has suggested, a ploy to help big Tory donors.

    And, finally, I can’t see what Lord Sainsbury has to do with any of this.

  9. alexsmith1982

    RT @leftfootfwd: @nextleft @alexsmith1982 No joke – the reality of Osborne's tax policy lauded by ConHome http://bit.ly/bzBFA1

  10. Chris Paul

    RT @alexsmith1982: RT @leftfootfwd: @nextleft @alexsmith1982 No joke – the reality of Osborne's tax policy lauded by ConHome http://bit.ly/bzBFA1

  11. Anon E Mouse

    Henry – Lord Sainsbury is one of Labour’s “Big Biz friends”. It seems to me with the countesses neice, educated at the same school as Osbourne, deputy leader of Labour, Harriet Harman, I fail to see the difference between the parties.

    When the Tories last leader John Major came from a council estate and was state educated and Labour’s last leader, Anthony Charles Linton Blair was privately educated it just seems things have switched.

    I run a (partial) manufacturing business and Capital allowances are OK but a lower tax rate would be better.

    The Capital allowance is only a percentage of the asset and only works if it is required ie. There is enough work to justify its purpose. Also to get £1.00 from the WDA (I’m in South Wales) costs the UK taxpayer £1.43 I was told by the very council offering to sort the money.

    Far better to drop taxes. Why do people want to pay more taxes to these idiots in power?

    Surely Henry you feel better able to control the money you earn than giving it to MP’s to pay for moats and duck houses don’t you?

    Lower taxes worked for Ronald Reagan in the States and there is no reason to believe it wouldn’t work here. Labour loves increasing taxes – NI is a straight forward tax on jobs for example.

    One thing I would say though about this enormous deficit the most useless chancellor Britain has ever had has landed us with is that I can’t see why we can’t just inflate our way out of it.

  12. Anon E Mouse

    Mr. Sensible – I hate the death of the manufacturing industry in this country and living not five miles from over 400 years of coal (at present rates) I do not understand why these Climate Change weirdos have been allowed to stop the production of cheap energy from our own resources.

    How can it be cheaper to import German coal than mine our own?

    That said, the reason manufacturing has been destroyed in Britain, by both the Tories and Labour, is because goods are so much cheaper to produce in China.

    People wanted to be part of the global family – they got it.

    Personally I recommend listening to Bob Dylan’s “Infidels” album and a song called “Union Sundown”. Two of the lines go:

    “Capitalism is above the law – they say it don’t count ‘less it sells”
    “When it costs too much to build it at home you just build it cheaper someplace else”

    That song was in the eighties and kind of explains lack of manufacturing to me…

  13. Russ Noble

    Osborne's policies are no April Fool | Left Foot Forward http://bit.ly/cpwjb6

  14. Mr. Sensible

    Anon E Mouse, I don’t think climate science had much to do with the closing of the pits; the privatization of UK coll did.

    That happened in the 1980s, which was I think before Climate Science really came out.

    But the science behind climate change is correct, and I know in one area of my own county of Nottinghamshire there is a lot of concern about a proposal by UK coll to have an open-cast mine near I think Eastwood.

  15. Anon E Mouse

    Mr.Sensible – Maggie Thatcher pushed “Global Warming” as a means of justifying the closure of the pits in the UK and increasing the idea of Nuclear power against the wishes of the Labour Party who were CND supporters and anti American at the time.

    The theory of CO2 causing a rise in temperature had been around since the 1880’s but no one paid it any heed until Thatcher came along – even the Tory Party disagreed with her but she got her own way and set up the IPCC – yes at Thatchers personal instigation and against the wishes of her party.

    The Tories set this lot of Climate Change waffle in motion – it died off with John Major but in 1992 (when the public were against the pit closures big time) the government paid millions in an advertising campaign to scare the public again and keep closing the mines.

    It really kicked off after 1992 and obviously when Labour came to power they jumped on the bandwagon as a means of keeping John Major’s “Green” tax escalator on petrol and all the other money grabbing wheezes they could come up with.

    I’m not saying climate science was the reason for the closure of the pits – stupid union members in the NUM run by nutters like Scargill did that but as an excuse it was certainly used and look where we are now.

    Personally I agree the climate is changing but so what? It always has. Deal with it.

    Come up with engineering solutions to solve the problem but don’t tax the public while you’re doing it – especially on information from those deceitful people in East Anglia. Glaciers gone by 2036? Amazon rainforest reductions and on and on.

    Only 25% of the public in the UK believe in (man made) Climate Change. Quite why there are so many stupid people in our country I do not know but there you are…

  16. Henry

    Anon: I don’t judge people on their background, but on what they do. By all accounts, Sainsbury was a good minister & has been a generous supporter of progressive causes (even if I don’t always agree with him).

    And by the way, Clement Atlee, generally reckoned to be Labour’s most successful leader, came from a comfortable middle class, public school background.

  17. Anon E Mouse

    Henry – Your starting comment was on the Big Biz (your remark) friends as if to suggest that Labour have acted differently.

    The only reason Labour has no big business investors any more is because of the way they treated them, eg David Abrahams (Not that we should be surprised considering the way they treat their own people eg Pater Watt, the woman Prescott had the affair with etc etc).

    Also big business in any country is attracted by winners (Tony Blair and the Formula 1 cigarette advert) and this useless busted flush of a government (no real policies going through the Commons as we speak)is hardly worth backing.

    My comments weren’t on class just that if you are going to criticise Cameron for his friends then please consider Labour are exactly the same (except no one will vote for them at the next election).

  18. Rebecca

    I am wondering the same thing as Thomas Byrne above: a cut in corporation tax covers all corporations, not just banks, so the idea that this only helps the City of London seems a bit far – fetched?

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