Chancellor Jeremy Hunt signals new tax breaks for companies in bid to end Tory rebellion over corporation tax in Wednesday’s budget
Chancellor Jeremy Hunt plans to cut the ‘effective’ corporate tax rate in Wednesday’s budget as he tries to defuse dispute over next month’s planned increase.
Amid growing anger over the tax hike from 19% to 25% next month, which has angered Conservative MPs and led party donors to privately warn they will cut their funding, Hunt used an interview with The Mail on Sunday to flag new tax breaks for businesses.
He said: “The most important measure we should consider is not the general corporate tax rate, but the effective corporate tax rate.”
Hunt added that he was looking at how in other countries, “you can reduce the amount of corporate tax you pay as a company because of the incentives they are given to invest in capital: you get your money back the following year.” your tax bill.
Even Hunt’s cabinet colleague Kemi Badenoch has highlighted criticism of the move, telling the Mail on Sunday today that businesses were calling for the planned increase to be scrapped.
Hunt, whose cumulative cabinet experience as Culture Secretary, Health Secretary, Foreign Secretary and now Chancellor spans nearly a decade, urges his critics to be patient with the government’s fiscal plans.
Hunt’s cabinet colleague Kemi Badenoch has highlighted criticism of the move, telling the Mail on Sunday today that businesses were calling for the planned increase to be scrapped.
The Business Secretary said: ‘I’d be lying if I said they didn’t tell me they wanted lower corporate tax.’
Ms Badenoch, one of the unsuccessful Tory leadership candidates who lost to Liz Truss and is the third person to take on the trade report since September, cautioned her comments adding: “We also saw what happened when we tried to cut taxes in a way that the markets did not find acceptable last September.
“What this government is all about is sound money and we have to make sure we are balancing the books.”
The budget is expected to include a “return to work” package to address the fact that there are five million working-age adults out of work.
This is likely to focus on pension reforms to reduce incentives for people to retire early, raising the retirement age earlier, a crackdown on benefit claimants and increased childcare support for those who receive low wages.
Changes to Universal Credit will include paying child care support up front, rather than in arrears, and increasing the maximum amount people can receive in child care 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 with Universal Credit who currently have no or limited job requirements will be asked to look for work or increase their hours.
Those over 50 will be offered ‘returnersships’ that offer skills training that takes previous experience into account, as well as an expansion of skills bootcamps and an expansion of the ‘Midlife MOT’ initiative aimed at helping people to ‘make informed decisions about your finances and retirement’.
Hunt said: ‘We have a historical problem in this country of being undercapitalised. We have less machinery per hour worked, less capital per hour worked and that has meant that our productivity is not as good as that of countries like Germany or Singapore. And so, yes, we need to look at the effective level of corporate tax.’
He added: ‘Even after the corporate tax increase, we will still have a lower overall corporate tax rate than any G7 country. We need to go on a journey to cut corporate taxes, but it’s not something we can do overnight.”
Other measures are expected to include a fuel tax freeze and a modest £5bn increase in the defense budget.