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.
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18 Responses to “Osborne’s policies are no April Fool”
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Osborne's policies are no April Fool | Left Foot Forward http://bit.ly/cGrCnb
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.
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.
alexsmith1982
RT @leftfootfwd: @nextleft @alexsmith1982 No joke – the reality of Osborne's tax policy lauded by ConHome http://bit.ly/bzBFA1
Chris Paul
RT @alexsmith1982: RT @leftfootfwd: @nextleft @alexsmith1982 No joke – the reality of Osborne's tax policy lauded by ConHome http://bit.ly/bzBFA1