Tax cuts to revive sluggish growth. That was the UK’s ambition before the fiscal storm that hit last autumn and led to the resignation of Prime Minister Liz Truss.
The budget presented on Wednesday, the first since Jeremy Hunt was appointed to finance in October, confirms that the project is no longer relevant. The corporate tax rate will drop from 19% to 25% for large companies from next April, a measure announced in 2021 to deal with the Covid bill, but which had since been called into question by the right wing of the Conservative Party.
At the time of the referendum in 2016, the UK was considering lowering its corporation tax to 17%. Today, the country is far from it, and the CIT rate of 25% will place it at the same level as France, whose corporation tax has historically been one of the highest among developed countries.
There remains the question of attractiveness, at a time when the economic effects of Brexit are beginning to be felt . Business investment suffered from the uncertainty linked to the long debates that followed the 2016 vote. This weakness is often cited as one of the factors behind the loss of productivity in the British economy.
And Conservative MPs in favor of Liz Truss’ economic program continue to make their voices heard in the chamber of the House of Commons. Gathered within a “conservative group for growth”, these parliamentarians are still strongly pleading for tax cuts. On the eve of the announcement of the budget, their leader, Simon Clarke, expressed concern about the rise in corporate tax. “It’s a tax on jobs and growth. It is obvious that this will have harmful effects on the whole economy which will end up costing families, ”he said in the columns of the “Daily Telegraph”.
Without going back on this increase, Jeremy Hunt’s budget includes several measures intended to improve the attractiveness of the United Kingdom. Chief among these is a tax advantage for investing companies, making the UK economy “unique among developed countries to have such an incentive tax regime”, according to the Chancellor of the Exchequer, who announced details in parliament on Wednesday. Its cost is significant: it is estimated at 9 billion pounds per year.
The British budget also provides for the creation of twelve investment zones benefiting from a privileged tax regime, on the model often put forward in the Canary Wharf district at the time of Margaret Thatcher.
These measures have been well received by employers, whose recommendations are taken into account more than at the time of Boris Johnson. “The tax write-off will keep the UK at the top of the rankings for attractiveness and puts us on a vital path to a more productive economy,” reacted Matthew Fell, acting chief executive of the CBI (Confederation for British Industry).
For the Labor opposition, this will not be enough to raise the bar. “We need a real industrial strategy to lower the barriers to investment. What was announced today is very far from it,” criticized Keir Starmer, the leader of Labour.