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”
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.
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).
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?