Entrepreneurs cheer corporation tax cuts
CUTS in corporation tax and measures to support investment won a warm welcome from business, offsetting some of the anxiety about the Chancellor’s moves to introduce a National Living Wage.
George Osborne is cutting corporation tax to 19pc in 2017 and 18pc in 2020, saving businesses £6.6bn by 2021 and benefiting more than a million firms.
The latest cuts come on top of a reduction to 20pc from 28pc in the last Parliament that the Treasury claims will save companies more than £10bn a year from 2016.
David Hall, chief executive of Doncaster-based pipe manufacturer Polypipe, said: ‘The corporation tax cuts are clearly helpful to us, we are pleased to see it coming in the right direction.
‘It will also help attract foreign investment into the UK, which is good for the economy.’
Analysis by the Government suggests that the cuts since 2010 could boost growth by up to 1.1pc or nearly £20bn in the long run.
Firms also welcomed the increase in the level of the annual investment allowance to £200,000 for plant and machinery bought from January next year. This should help spur business investment, which is forecast by the Office for Budget Responsibility to rise sharply in real terms as the economic recovery gathers pace.
Mark Campbell of pie and quiche maker Higgidy Pies, which sells its wares through supermarkets including Sainsbury’s and Waitrose, said: ‘Cuts in corporation tax are good for us because we don’t employ expensive accountants to hide our worldwide profits. We are a British manufacturing business making British products.
‘We’ve invested £3.5m in three years in our kitchens. It is very capital intensive. An increased allowance will enable us to buy more ovens and rolling pins, so it is improving productivity and allowing expansion. We are buying land and want to double capacity in the next three years. We plan to invest £5m, so higher investment allowances will really help.’
He added that the company already employs 250 people and hopes to create another 150 jobs over the next three years.
‘We already pay people more than the living wage. Our sector is traditionally quite low skilled and low paid, but we see people as one of our core assets and we welcome measures that put money in the pockets of those who need it most.’
The compulsory National Living Wage will start in April at £7.20 an hour, rising to £9 by 2020 and, according to the OBR, will have a ‘fractional’ effect on jobs.
Osborne said he is offsetting the impact with the cut in corporation tax and a reduction in employers’ national insurance contributions for small firms.
But John Cridland, director general of the CBI, said: ‘This is a doubleedged Budget for business’, adding that firms would be concerned by ‘legislating for wage increases they may not be able to deliver’.
‘ The CBI supports a higher skilled, higher wage economy, but legislating for a living wage does not reflect businesses’ ability to pay. This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6pc,’ he said.
His views were echoed by Chris Morgan, the UK head of tax policy at KPMG, who said the Budget is a ‘mixed bag’ for business with ‘big questions’ over the National Living Wage. ‘The question will be to what extent the increased cost can be passed on to customers,’ he said.
Mr Hall added: ‘The investment allowance is clearly a good thing. I was pleasantly surprised it is set at £200,000. On the living wage, broadly it is positive but we need to be careful about the inflationary effect as it erodes differentials further up.’
‘I would have liked to see more on infrastructure, but overall it was a good Budget for business.’