George Osborne hits out at Sunak’s ‘unenterprising’ corporation tax hike
Former chancellor George Osborne has slammed Rishi Sunak for his £45bn plans to raise corporation tax, saying they will send a message to other countries that “Britain isn’t a very enterprising place”.
Osborne said today that he would have preferred to raise VAT to raise government revenues instead of Sunak’s plan to hike corporation tax for the the UK’s largest companies from 19 to 25 per cent.
Osborne was responsible for cutting corporation tax from 26 per cent to 20 per cent in his six years as chancellor.
Speaking at an Institute for Government event today, Osborne said: “I don’t want to criticise Rishi – but the idea that you can raise it to 25 per cent without consequences is not true. We wait to see if this tax rise does go ahead, what effect it has.
“When I was trying to raise money, I preferred the VAT lever not corporation tax. If you raise taxes on business, you’re just sending a message around the world that Britain isn’t a very enterprising place, just when you’re trying to encourage that in a recovery.”
UK companies with annual profits of £250,000 or higher will have their corporation tax rate increased to the 25p rate in 2023 under the chancellor’s plan.
Companies with profits of less than £50,000 will remain on the 19 per cent corporation tax rate, while there will be a sliding scale rate for companies with profits between £50,000 and £250,000.
Sunak said in last week’s Budget that he had to raise taxes to claw back some of the £400bn he has spent during the Covid crisis and put the nation’s finances in a more sustainable position.
The new corporation tax rates will raise £45bn over their first three years, while freezing the income tax thresholds for two tax brackets will raise almost £30bn before 2024.
His policies will make the UK’s tax burden the highest it has been since 1968 under Harold Wilson’s government.
One tax that did not get increased in the Budget was fuel duty, which Osborne says is not politically viable in the current climate.
“You can’t raise fuel duty, yet people say ‘pay the nurses more’,” he said.
“Well how are you going to do that?
“Replacing motoring taxes are going to be a huge challenge for the Chancellor – either this one, or the next one.”
Sunak also announced in his Budget a “super deduction” for the next two years, which will effectively subsidise business purchases of plant and equipment.
The super deduction, expected to cost £25bn, will see businesses able to claim 130 per cent of their tax bill in deductions.
The Office for Budgetary Responsibility (OBR) has said the measure will not create new business investment, but will instead only bring forward investment that was already planned.
Sunak today said he disagreed with the OBR, telling MPs “it will increase the amount of investment as well given the attractiveness of doing so”.
Prime Minister Theresa May criticised the super deduction today, saying the measure would not drive innovation and growth.
She told MPs: “I am concerned that the government has simply adopted the Treasury orthodoxy that if you wish to encourage investment by business all you do is raise capital allowances.
“Year after year that is the answer the Treasury always comes up with. If we want an innovation economy what we need to do is to invest and support investment in areas which encourage growth and innovation.
“That means [research and development].”