Chancellor dismantles key Osborne pledge to cut corporation tax

Hammond
Philip Hammond will deliver his first Autumn Statement on November 23 Credit: Reuters

The new Chancellor has indicated that he will not slash corporation tax to 15 per cent in a bid to boost the economy, dismissing predecessor George Osborne’s plan as just a suggestion.

Philip Hammond told his European colleagues at a meeting of finance ministers in Bratislava that he intended to stick to a plan to cut the rate to 17 per cent by April 2020, from its current level of 20 per cent.

In his final days in office, Mr Osborne put a reduction in corporation tax at heart of a Brexit recovery, signalling that the rate would be cut to 15 per cent or lower.

Mr Hammond’s comments mark a further departure from the Osborne regime. Ahead of the Brexit vote, Mr Osborne threatened to implement what critics dubbed a £30bn “punishment budget” if the UK voted to leave the EU.

Theresa May, the Prime Minister, has confirmed that the Government will not attempt to balance the books by the end of the decade, although she has said a budget surplus remains an ambition.

Mr Hammond signalled last week that any fiscal stimulus in the Autumn Statement would be concentrated on boosting Britain’s roads and railways.

Business groups and tax experts urged Mr Hammond to focus on a broad range of tax cuts to boost the economy.

Adam Marshall, acting director general at the British Chambers of Commerce, said: “For most businesses the current ambitions on corporation tax go far enough and if there are to be tax cuts to stimulate business confidence and investment, they should be on the huge upfront costs that businesses face before they turn over a single pound.

“Companies may cheer lower profit taxes, but not at the expense of paying lots more upfront,” he added. “If there are to be tax cuts, they should be for things like business rates to spur more investment.”

George osborne
George Osborne, the former Chancellor, is responsible for reducing corporation tax from 28pc in 2010 to 17pc by April 2020 Credit: Reuters

Chris Sanger, global head of tax policy at EY, said: “The Government has already said that competitiveness includes the tax rate, the tax base, the way it is administered and how tax policy is made.

"It’s by merging all four of these that it can design a suitable tax system that will be successful in getting investment into the UK.”

James Sproule, chief economist and director of policy at the Institute of Directors, also called on policymakers to reduce other burdens that businesses faced. “If Philip Hammond keeps cutting corporation tax, he will have less room to cut other taxes such as business rates and personal income tax. There needs to be a balance.”

A spokesman for the Treasury said: “The government is committed to a competitive tax regime and decisions on tax polices will be set out at future Autumn Statements and Budgets in the usual way.” 

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