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%.
Graeme Crawford, tax partner at Ernst & Young in the Midlands, 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.
He added: “The UK’s arrivals lounges are likely to be booming next year as entrepreneurs respond to a far more positive message from the Chancellor. In his speech, the Chancellor has matched his reforms of the business tax environment by addressing the much maligned 50p rate. By removing this deterrent, the Chancellor has put the substance behind his rhetoric; the UK is open for business.
“HMRC’s report showed that the first year of the 50p rate generated far less for Treasury coffers than expected, demonstrating the pervasive image that it had portrayed of the UK. The Chancellor pointed out that a rate of 45% brought in broadly the same amount of revenue, without all the negative baggage.
“The delay of a year (it takes effect from April 2013) is somewhat surprising, especially as he criticised his predecessor for forestalling. In practice, many people will now plan on 45% but we can still expect income to be deferred until after the 50p rate reaches its death day.”
