Chancellor Jeremy Hunt signals new tax breaks for firms in bid to see off Tory rebellion over corporation tax in Wednesday’s Budget
- Jeremy Hunt has faced criticism over the coming rise in corporation tax
- Read more: ’50 is no time to put your feet up,’ says Chancellor Jeremy Hunt
Chancellor Jeremy Hunt is planning to cut the ‘effective’ rate of corporation tax in Wednesday’s Budget as he tries to defuse the row over next month’s planned hike.
Amid mounting anger over the rise in the levy from 19 per cent to 25 per cent next month – which has angered Tory MPs and led party donors to warn privately that they will cut their funding – Mr Hunt used an interview with The Mail on Sunday to signal new tax breaks for business.
He said: ‘The most important measure we should be looking at is not the headline rate of corporation tax but the effective rate of corporation tax.’
Mr Hunt added that he was examining the way that in other countries, ‘you can lower the amount of corporation tax you pay as a company because of the incentives they’re given to invest in capital – you get your money back the following year off your tax bill’.
Even Mr Hunt’s Cabinet colleague Kemi Badenoch has highlighted criticisms of the measure, telling today’s Mail on Sunday that companies were calling for the planned rise to be axed.
Mr Hunt, whose cumulative Cabinet experience as Culture Secretary, Health Secretary, Foreign Secretary and now Chancellor runs to nearly a decade, urges his critics to be patient over the Government’s tax plans
Mr Hunt’s Cabinet colleague Kemi Badenoch has highlighted criticisms of the measure, telling today’s Mail on Sunday that companies were calling for the planned rise to be axed
The Business Secretary said: ‘I would be lying if I said they weren’t telling me that they wanted lower corporation tax.’
Ms Badenoch – one of the unsuccessful Tory leadership candidates who lost out to Liz Truss and is the third person to take on the business brief since September – caveated her remarks by adding: ‘We also saw what happened when we tried to lower taxes in a way that the markets didn’t find acceptable last September.
‘What this Government is about is sound money and we need to make sure that we are balancing the books.’
The Budget is expected to include a ‘back to work’ package to tackle the fact there are five million adults of working age who are not in employment.
This is likely to centre on pension reforms to reduce the incentives for people to take early retirement, raising the retirement age earlier, a crackdown on benefit claimants and greater childcare support for the low paid.
Changes to Universal Credit will include paying childcare support upfront, rather than in arrears – and increasing the maximum amount people can receive in childcare support from £646 to £950 for one child, and from £1,108 to £1,629 for two or more children.
More than 700,000 parents and guardians on Universal Credit who currently have no, or limited, requirements to find a job will be asked to look for work or increase their hours.
The over-50s will be offered ‘returnerships’ which offer skills training that takes previous experience into account, as well as an expansion of skills bootcamps and an enlargement of the ‘Midlife MOT’ initiative aimed at helping people ‘make informed decisions about their finances and retirement’.
Mr Hunt said: ‘We have a historic problem in this country of being under-capitalised. We have less machinery per hour worked, less capital per hour worked and that has meant our productivity is not as good as countries like Germany or Singapore. And so, yes, we do need to look at the effective corporation tax level.’
He added: ‘Even after the corporation tax rise, we will still have a lower headline rate of corporation tax than any G7 country. We need to go on a journey to bring down business taxation but it’s not something we can do overnight.’
Other measures are expected to include a freeze in fuel duty and a modest £5 billion increase in the defence budget.
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