Three former chancellors in corporation tax warning
Lord Hammond adds to growing chorus of opposition to Rishi Sunak’s flagship economy policy
PRESSING ahead with a big increase in corporation tax would be a mistake, three former chancellors have warned Rishi Sunak.
Lord Hammond, who was Theresa May’s chancellor, last night became the latest to warn against the move, saying he was “disappointed” with the raise from 19 to 25 per cent.
Kwasi Kwarteng, who was chancellor under Liz Truss, has said the policy would not help the UK to become more competitive.
And George Osborne has also said Mr Hunt should cut business taxes at next month’s Budget to boost the economy.
The former chancellors join business leaders and economists in a growing revolt against the flagship policy.
Lord Hammond said: “My view on corporation tax is always that it’s better to have lower than higher. I am quite disappointed that we will be increasing it to 25 per cent.
“Businesses would accept 25 per cent corporation tax if they felt they had all the other bits in place for a growing economy. But the labour market is not working, the planning system is not working and none of the preferential trade deals with big powers around the world have come to pass.”
Mr Kwarteng, sacked as chancellor by Ms Truss shortly before she resigned as prime minister, said the increase in corporation tax “doesn’t help our competitiveness” adding: “We have got to look at ways to improve our attractiveness to foreign investors.”
Meanwhile the Federation of Small Businesses (FSB) said that the policy would be disastrous for the UK’s one million limited company directors. “If they earn more than £50,000, they will get hit and that hurts a lot of people. People think corporation tax is only an issue for big businesses – but when we speak to our members and ask what they need help with, corporation tax is top of the list,” Craig Beaumont, the FSB’s spokesman said.
“If you want the economy to bounce back, one way of not doing that is making it harder for small business owners.”
The Confederation of British Industry has also warned Jeremy Hunt must cut the tax burden on companies in his Budget next month.
Research by Europe Economics, a consultancy, for the TaxPayers’ Alliance found the rise in corporation tax could result in a £30.2 billion (0.9 per cent) reduction in economic growth over 10 years.
It also finds that average weekly earnings would be £6.73 (0.9 per cent) lower if the increase goes ahead. This slower growth would result in two thirds (64 per cent) of the revenues being lost through fewer tax receipts.
Meanwhile, Priti Patel, the former home secretary, has led a group of 25 Tory MPs calling on the Chancellor to ease the tax burden and stop “penalising” families.
In a letter to Mr Hunt, they say: “We ask that you take steps to help families keep more of the money they earn. This should include revisiting the current personal taxation system to make it simpler and fairer for families.”
The letter, organised by Sir Edward Leigh, the chair of the Catholic Union, is also signed by Graham Brady, the chair of the 1922 committee of backbenchers.
A Government spokesperson said: “Growing the economy is one of the Prime Minister’s top priorities. From April our corporation tax rate will still be the lowest in the G7.”
A Treasury spokesman added that they have “lifted millions of families out of paying tax altogether by raising income tax and NI thresholds”.