Chancellor announces Budget to 'back business'
The Chancellor George Osbourne has delivered his third budget, which he says will “unashamedly back business”, making the UK more competitive for business than any other economy, while initiating far-reaching tax reforms and a simpler tax system to support working families.
He told MPs: “Britain is going to earn its way in the world. There is no other road to recovery.”
“We will earn our way in the world by saying to all businesses – large and small: We will provide [British businesses] with the modern infrastructure; new growth-friendly planning rules and employment laws; the kinds of schools and universities and colleges our future workforce needs.”
And in return ... British businesses, [will] have the self-confidence to: invest, expand, hire, innovate and be the best.”
He said that the Office for Budget Responsibility (OBR) has revised their growth forecast in the UK to 0.8% this year, rising to 3% n 2015 and 2016, taking Britain out of a technical recession. Inflation is expected to fall throughout the period, from 2.8% this year to 1.9% next year, and then 2% by the end of the forecast period. Although unemployment is expected to peak this year at 8.7%, before falling to 6.3%, the deficit is also anticipted to come down, and is forecast to reach 7.6% next year.
He said: “Recession will be avoided, but there is more momentum than previously anticipated.”
“But we must stick to the course.”
The Chancellor announced the key parts of the budget for businesses:
- Headline rate of corporation tax will be cut to 24% from April, falling to 22% by 2014 (although the bank levy will be raised to 0.105 per cent from next January so that these cuts do not benefit the banks)
- Low interest rates will be passed on to small businesses, through the National Loan Guarantee Scheme, with £20bn of guarantees in total will be available.
- A consultation will be held for calculating tax for firms with a turnover of up to £77,000 on a new cash basis, to simplify the filling in of tax returns dramatically.
- A detailed consultation on the integratation of the operation of income tax and national insurance will be held.
- The Finance Partnership will be increased by 20%, in addition to the expansion of the Enterprise Finance Guarantee.
- UK Export Finance will be expanded and news plans set out to help smaller firms in new markets.
- The Enterprise Management Incentive Scheme grant limit will be doubled to £250,000 to help new start-up businesses recruit and retain talent.
- An “above the line” research and development tax credit will be introduced.
- Enhanced capital allowances for start-up businesses will be offered in the new Scottish enterprise areas in Dundee, Irvine and Nigg. A new Welsh Enterprise Zone will be created in Deeside, as well as the first Enterprise Zone in Northern Ireland.
- Funding was announced for ultra fast broadband and wifi in ten of the UK’s largest cities, with a further £50m available for smaller cities.
- No changes to the fuel duties, while Vehicle Excise Duty will be increased by inflation only.
- VED for road hauliers to be freezed.
In addition the Chancellor also announced changes to the tax system, aimed to make a simpler, fairer system:
- The personal tax free allowance will be raised to £9,205 in April 2013.
- A cut in the top rate of tax from 50p to 45p, which will kick in from next year.
- VAT loopholes and anomalies will be addressed - for example hot takeaway food on the high street being charged VAT while new hot takeaway products in supermarkets are not.
- A cash increase in the Basic State Pension of £5.30 a week, with a new single tier pension being introduced for future pensioners.
- A new Personal Tax Statement will be introduced to tell people how much income tax and national insurance they have paid; average tax rates; and how this contributes to public spending.
- Stamp Duty Land Tax charge will be increased to 15% on residential properties over £2 million which are bought via companies.
- A new Stamp Duty Land Tax rate of 7% will be levied on properties worth more than £2 million.