Budget 2012: Osborne sets out ‘Budget for business’

CHANCELLOR George Osborne promised his Budget would “back business” as he cut corporation tax and scrapped the 50p income tax rate.

Promising to create a tax system that is “more competitive for business than any other economy in the world, ” Mr Osborne revealed corporation tax would be cut to 24% next month with further cuts taking it to 22% by 2014 , 1% lower than previously set out.

He pledged to invest in the Network Rail’s “Northern Hub” scheme to improve services in the North with spending on lines connecting Sheffield and Manchester and Manchester, Preston and Blackpool and fund “ultrafast broadband” for the UK’s ten largest cities including Leeds, Bradford, Birmingham and Manchester.

New figures from the Office for Budget Responsibility saw it increase its forecasts for UK GDP in 2012 from 0.7% to 0.8%. The OBR predicted growth of 2% in 2013, 2.7% in 2014 and 3% in 2015.

Mr Osborne said: “This Budget rewards work.

“This Budget supports working families and helps those looking for work. It unashamedly backs business and is on the side of aspiration.”

Telling the House the 50p income tax rate was “harming the British economy” and was costing the taxpayer as money was moved to avoid the levy, he defied warnings that cutting the top rate of tax represented bad politics and cut the rate from 50p to 45p from April next year.

Next year will also see the largest ever increase in the basic rate tax allowance, increasing by £1,100 to £9,205.

“Together the British people will ensure the effort and share the rewards.  This country borrowed its way into trouble, now we will earn our way out,” he said.

The Government will consult on plans to allow small businesses with turnover up to £77,000 to be taxed on the basis of the cash going through the firm and a separate consultation will also be launched next month on proposals to integrate income tax and national insurance.

The Chancellor revealed the Government is considering offering “enterprise loans” to help young people start their own businesses.

In the Autumn Statement, Mr Osborne unveiled plans for a £1bn fund, known as the Business Finance Partnership, targeting midcap business. Today he pledged to increase that fund by 20%.

Martin Portnoy, tax partner at Ernst & Young in Manchester, said:  “The reduction in corporation tax is to be commended. It’s a shame though that the fall in higher tax rate to 45p and the personal allowances threshold increase to £9,205 are both delayed until next year.

“Overall a good budget for business with the commitment to infrastructure investment.”

Mr Osborne said Government borrowing was due to come in below target at £126bn and would fall to £120bn in 2013 and £98bn in 2014.

The Chancellor revealed the Government was set to benefit from a £2.4bn windfall from the end of operations in Afghanistan and this would in part be used to fund a series of new benefits for armed services personnel.

He confirmed plans aired in the run up to the Budget to consult on the idea of issuing gilts beyond 50 years.

Following up a speech made by David Cameron earlier in the week,  the Government, he said, was working with 12 pension funds on ways of increasing private investment in infrastructure.

On energy, he criticised the burden of the carbon reduction commitment on business and promised to find administrative savings or scrap the measure.

The Government, Mr Osborne said, would be investing £100m in new university facilities, establishing a new UK centre for aerodynamics and put forward measures that would make the UK “Europe’s technology centre”.

He introduced a new 7% stamp duty – 15% on those bought via companies – rate on homes worth more than £2m and brought in a new cap on pension tax relief.

Tax on tobocco was raised by 5% above inflaton but there was no move on alcohol.

Mr Osborne was speaking after figures published earlier in the day showed that public sector borrowing grew to £15.2bn in February, up from £8.9bn last year.

The figure was ahead of analysts expectations of £8bn although the data from the Office of National Statistics suggested the Government is still set to beat its borrowing targets for the year.