Hunt’s mission is to supercharge growth
JEREMY Hunt’s rhetoric in advance of today’s Budget has been bold and upbeat. He wants to ‘supercharge growth’, he says, unblock obstacles to regeneration and get Britain back to work. So will his actions match his fine words?
Treasury sources suggest the Chancellor plans to announce the creation of a dozen low-tax zones around the country to stimulate regional growth. Benefits would include tax breaks, investment incentives and specialist business support amounting to around £1billion.
He is also expected to encourage higher earners – such as senior doctors – to work for longer by restoring the lifetime tax-free allowance on pensions to £1.8million.
This would go some way to righting an egregious Tory wrong of the past. The cap stood at £1.8million in 2010, but the thenchancellor George Osborne steadily slashed it – first to £ 1.5million, then £1.25million and finally to £1million.
It was a shabby thing for a Conservative chancellor to do and a dagger to the heart of the pensions system.
For while £1million may sound a huge amount, it is money accrued over a working lifetime and currently buys an annuity of some £40,000 a year, hardly a king’s ransom and certainly far less than multi-millionaire Mr Osborne would regard as a comfortable retirement income.
Even the fact that the cap is being raised again will come as cold comfort to the estimated 300,000 workers who had to stop paying into their pension funds after reaching previous limits. Some will have lost hundreds of thousands of pounds.
If the public are to trust the pension system it must have stability. This constant chopping and changing, aptly described by savers’ champion Ros Altmann yesterday as like the hokey-cokey, makes retirement planning a nightmare.
However, Mr Hunt is doing the right thing in raising the cap and will no doubt throw out a few other bones in his Budget. But is he prepared to address the real elephant in the room?
The unpalatable truth is that after 13 years of Tory-led government, this country is groaning under the highest tax burden since the 1940s.
And rather than lightening it, the Treasury is about to impose the biggest-ever hike in corporation tax. At a stroke, it is due to go up by nearly a third – from 19 to 25 per cent – stifling growth, threatening jobs and discouraging enterprise.
For a company with money to invest it is a huge disincentive to spending it here, as AstraZeneca recently proved when it relocated a new pharmaceuticals plant from the UK to Ireland, where the headline corporation tax is just 12.5 per cent. Why wouldn’t they?
Labour is already trying to steal the Tories’ clothes as the party of business – with some success. This toxic tax rise plays right into their hands.
Yes, borrowing has been far too high and must be brought under control, but discouraging business development will only make a bad situation worse.
According to the Institute for Fiscal Studies, the Government has benefited from an unexpected ‘windfall’ of around £30billion this financial year, thanks largely to soaring tax revenues and falling gas and electricity prices, which have dramatically reduced the level of energy support payments.
Given the cost of living crunch, is it really too much to expect some of that windfall to come back in tax cuts? After all, most of it was our money in the first place.
The Chancellor has said he will reduce taxes eventually but that with the public finances in such poor shape, the time is not right. We disagree. If he truly wants to ‘supercharge growth’, the time is now.
Airy promises of jam tomorrow are simply not enough.