Hunt faces revolt over tax rise in Budget
Chancellor is warned levy on companies will have ‘chilling effect’ on the economy
JEREMY HUNT is poised to trigger a Tory backbench revolt over the Budget today as he pushes ahead with a rise in corporation tax despite warnings it will harm the economic recovery.
The Chancellor will defend the rate rise from 19 to 25 per cent, which will kick in next month, by arguing that major tax cuts at this time would risk destabilising the public finances.
Mr Hunt will also try to take the sting out of the rise by unveiling a multi-billion pound scheme allowing businesses to reduce their tax bill by investing in the UK.
A backlash was growing last night as Conservative MPS said the tax rise would have a “chilling effect on the whole economy” if it was not scrapped.
The Budget will include spending giveaways, such as an announcement of 30 hours of free childcare for one- and two-year-olds in England to help parents get back to work.
It will take place against a backdrop of strikes, with teachers, university lecturers, civil servants, junior doctors and London Underground drivers walking out.
Mr Hunt will use his Budget speech to insist he has a plan for securing economic growth, in an attempt to see off Tory tax rebels.
He will say: “In the autumn, we took difficult decisions to deliver stability and sound money. Today, we deliver the next part of our plan: a Budget for growth.
“Not just growth from emerging out of a downturn. But long-term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people. All whilst making our country one of the most prosperous in the world.”
However, Simon Clarke, the Tory MP and former minister who helped set up the pro-tax cuts Conservative Growth Group, issued a warning shot. He said: “There are some very welcome policies in this Budget but it is also the case that there is real concern about the corporation tax rise in particular.
“This is a tax on jobs and growth. It is very hard to see how it doesn’t have a chilling effect on the whole economy in a way which will cost every family in the country.”
Boris Johnson, the former prime minister, is among those Tory MPS who have called for the corporation tax rise to be abandoned, although it was initially announced when he was prime minister.
His response to the measures will be closely watched, as will that of Liz Truss, who has avoided interventions in recent weeks but defended her tax-cutting agenda earlier in the year.
Mr Hunt and Mr Sunak inherited economic turmoil from Ms Truss last October, and taxes were raised markedly to calm markets.
The Confederation of British Industry, one of the country’s leading business groups, has been among industry voices warning about the impact of the corporation tax rise.
The economic backdrop has improved since last autumn, with the Office for Budget Responsibility (OBR) expected to predict a shorter and shallower UK recession this year.
Stronger than expected tax receipts and falling energy costs will give Mr Hunt some money to play with, though Treasury insiders have stressed the
scale of interest payments on government debt remains high.
At the centre of the Budget will be a push to get people back to work amid alarm in Whitehall at how many people dropped out of the labour market during the pandemic. A large increase in how much people can put aside for their pensions while minimising tax is expected, in a move aimed at dissuading people from early retirement.
Companies will be encouraged to carry out annual health checks in a bid to keep the workforce in shape, while work coaches will be offered to more job seekers on benefits.
In an eye-catching measure, the existing free 30 hours of free childcare offer for three- and four-year-olds will be extended to one- and two-year-olds.
The energy price guarantee, which effectively caps yearly bills at £2,500 a year, is set to be extended to the end of June, while an extra £5 billion on defence spending will be confirmed.
can also reveal the Budget will include measures to ease the impact of EU “nutrient neutrality” rules blamed for delaying construction of 120,000 homes. “Local nutrient neutrality credit schemes” will be floated, which could help developers hit requirements to show they have mitigated pollution impact on waterways.
Hundreds of thousands of workers will stage a strike tomorrow in what threatens to be the biggest walkout since the wave of industrial action started last year. Public sector pay is growing at its fastest rate since 17 years. Salaries were 4.8 per cent higher in the period from November to January than they had been a year earlier, according to the Office for National Statistics.