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Osborne: We’ll revive economy by cutting business tax below 25p
Joe Murphy6 Mar 2009
Corporation tax may be cut below 25p under Tory plans to reduce the debts of industry, shadow chancellor George Osborne announced today.
Firms will get less tax relief on their borrowings and be encouraged to issue shares to raise money. The rewards could be lower stamp duty on shares or a cut in the headline rate of corporation tax.
“By reducing the tax breaks for debt we could potentially fund a significant reduction in the headline rate of corporation tax — a key determinant of our international competitiveness,” he declared to businessmen in Birmingham.
“I have already committed to reduce the headline rate from 28p to 25p by reducing complex reliefs and allowances, but we will need to go further if we are to keep pace with an increasingly competitive global economy.”
Mr Osborne pledged a “considerable prize” with a simpler and more competitive tax system, encouraging jobs and investment.
British businesses must become less dependent on debt, he said. “This is already painfully clear in our banking industry. Economy built on debt has to give way to one built on greater ownership.”
His speech comes after CBI director general Richard Lambert predicted this week that equity capital will play a more prominent role following the credit crunch.
Mr Osborne said the corporate tax structure had long favoured debt over equity by making interest costs fully deductible while taxing returns on equity. This had been exacerbated by Gordon Brown taxing pension funds dividends more heavily in 1997.
He promised the changes would be long-term to give businesses time to adjust. But a recession was “exactly the right time” to invest in new entrepreneurs: “It is start-ups not bail-outs that will drive our recovery.”
The shadow chancellor also warned that Britons would have to tighten their belts to climb out of recession. “The truth is that Britain is going to have to work hard and save hard to get out of this hole. The Conservatives are ready to tell people these home truths, and the country is ready to hear them,” he said.
Reader views (22)
One source of major source of revenue for the next non-Labour government is the highly inefficient public service sector, and the thousands of unnecessary schemes, officials, and bureaucrats. This is a major burden on the tax payer, and we are haemorrhaging obscene amounts of money via over resourced, mismanaged, and unnecessary (in some instances) “public services”. But nothing will be done about until we get a change of government, and the horrendous waste will continue until then.
- Xtremely Worried, UK, 09/03/2009 08:09
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The only way UK can come out of recession is the devaluation of the POUND! This way, property oweners keep their worth, no negative equity, boom in exports - look at China , they had to import materials to export and yet their money was forced to revalue after the country's tremendous build up of foreign reserves!!
- Ck, Northwood, Middx, 09/03/2009 07:50
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Seems sensible. Less taxes of all types on business will enable more businesses to survive and to employ people. This should be paid for in public spending cuts.
- Patrick, london, UK, 09/03/2009 03:29
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Really easy to talk like that when you're in opposition.
- J Mark Dodds, Camberwell, London, 09/03/2009 01:12
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The tories have already said the cuts to Inheritence tax will go ahead (not affected by present position) and now cuts to business taxes! What they dont say is where the money to pay for these cuts will come from? - No doubbt its listed in their "Hidden Agenda" you know the one thay used to double VAT to pay for cutting tax for themselves!!
Tories have one rule "To him that hathe shall be giveth, to him that have not shall be taketh" Just look at how Boris has just increased fares by far more than the penuts most people will save in his Council prescept!
Anyway Gordon has as much right to be PM as John Major had when Thatcher was deposed!
- Melvyn Windebank, Canvey Island, Essex, 08/03/2009 16:07
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Yada, Yada, Yada, come on George grasp the bigger picture. The economy will only work when the British are incentivised to work and earn more than they consume not just on average but accross the board and at all parts of the spectrum. Its the economy stupid.
- Bill G, Gerrards Cross, 08/03/2009 00:23
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Instead of Boom and Bust Gordon brought about Gloom and Doom. Clarkson was right . . .
- Albert Hall, hove england, 06/03/2009 18:56
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Yeah! Yeah! It worked so well in the Republic of Ireland (my own country) didn't it, George?
- Dectora, London UK, 06/03/2009 17:55
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If Business taxes were cut then the Executives would just use the extra money to boost their pay packets and bonuses. These people are so selfish and greedy that they have no intention of getting the economy out of a hole. Also Company contributions to the Tories would be increased out of gratitude.
- G Gritt, Acton England, 06/03/2009 17:45
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Perhaps if we made sure that Companies and Millionaires like Osborne, Cameron and their Banking Mates paid proper rates of UK Tax then the lower paid taxpayers would not have to pay more Tax to make up for their selfish behaviour.
- T Turk, Isleworth England, 06/03/2009 17:42
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Brown has the experience of misleading the UK economy for 10 years when global conditions were like a millpond. He kept boasting it was all due to him. Stupid and arrogant, he was totally wrong. It was mainly 300 million chinese workers making cheap goods.
As everyone now knows Brown had no skill, values or wisdom. Many saw Brown taking huge risks with public sector debt, and letting banks do the same by telling the FSA to let RBS and HBOS go ahead. Many got out, but some were conned as Brown boasted 'I ended boom and bust'; and 'I ended the economic cycle'. How stupid and arrogant can he be to make those claims?
Having wrecked UK private sector finances, and sold all reserves and destroyed UK pensions and savings (down from 10% to 0%), Brown has destroyed public sector finances.
His level of incompetence would have anyone fired at once from a proper job, where people must be responsible.
I would not trust Brown for advice on anything. If he suggested any action, I would consider the opposite may be far wiser.
History will see Brown as 1) an unelected PM who 2) wasted 10 years and 3) did the opposite of his boasts. Instead of ending the economic cycle, he destroyed 35% of Uk wealth and made the cycle far worse.
- Eddie, birmingham, 06/03/2009 17:30
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No doubt at some stage the country will pull out of recession and when the recovery comes it will be led by businesses. That is why Mr Osborne's proposals stack up. Unlike Gordon Brown he recognises that business creates wealth not Government. Tax reductions for individuals will no doubt be part of a conservative agenda when the time is right, but getting businesses back on their feet has to be the right priority. As for those who allege the Conservatives have said nothing about the failures of bankers un the current crisis - they must be blind and deaf or perhaps just wilfully stirring things.
- James Elliott, Eastbourne UK, 06/03/2009 17:25
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Osborne has hit the nail on the head on how to rescue our economy: lower taxies and duties.
VAT cuts, interest rate cuts and banking bailouts have all failed. "Printing more money" via QE will also fail, as it did in Japan in the early 2000s.
But if you return money to the economy naturally, via more disposable income, the revenue will flow to the treasury, banks, retailers and suppliers through increased spending and saving.
Government will have less money initially to spend, but much of it will flow back as VAT returns on sales and tax on savings. The remaining "black hole" can be filled by reducing civil service costs (pensions, MPs expenses and wasteful projects, such as the Olympics).
- Nobby Clark, Perth, Scotland, 06/03/2009 16:50
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Out of the mouths of babes and sucklings !!!
Get some experience in !!
- Bernard Parke, GUILDFORD, 06/03/2009 16:25
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Low taxes as the engine of growth. We have heard it all before! Tax cutting under Bush meant record levels of US deficit. The low tax havens of Ireland and Iceland now face bankruptcy. Yet the rich in all these countries have seen their wealth rocket at everybody else’s expense. To be fair to Osborne, at least his honest and has shown his true colours. They are the Party that cares only for the haves - don't be fooled by Cameron’s chameleon rhetoric!
- Manuel, London, 06/03/2009 15:16
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Twentyfive years ago the Conservatives were shouting from the rooftops that striking Miners were holding the Country to ransom,but we hear very little from them about the striking bankers.
- Colin, Bristol, 06/03/2009 14:55
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Labor has screwed business right from the get go. The new jobs in the UK, as in the USA will come from the small companies employing less than 50 people. It is these entrepeneurs and small mid size companies that should get the breaks. Offer ultra low tax rates, special employer NI rebates, industrial rate rebates. These are the killers and cash guzzlers that destroy small companies. Set them free!. The Tories have an open goal here, go for it! Flush the socialist statist losers out once and for all!
- James Macleod Ritchie, Oyster Bay Cove, 06/03/2009 13:54
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It used too be that most investors (Pensions and ISA) could reclaim a lot of the corporation tax that had been paid on the profits that provided their dividend. When this was stopped, corporate bonds become for more tax advantaged, this is one reason companies become so dependent on debt.
Now remind me when/who did this…
I am glad that there is no a move to more stable long-term share based funding.
- Ian Ringrose, Birmingham, 06/03/2009 13:37
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Hopefully when Osborne becomes chancellor next year and becomes more wary and wiser, he will turn out to be a great chancellor - In his early days he wrote some interesting articles about simplifying the tax system, restraining the state and bringing back efficiency and value for money across all the public sector - Watch this space but a future Prime Minister I predict. This guy is going to be a revelation.
- David Green, London, 06/03/2009 13:08
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Don't forget to cut the workers taxes as well.
If you want spenders and buyers; give them the money to spend etc.
If not; Business won't get far.
- Mickyinlondon, london, 06/03/2009 13:00
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Business is just like a consumer - they go where it is best ........
- Graham Grimshaw, Ruislip UK, 06/03/2009 12:30
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About time,
Labour has done nothing to help businesses, and now the businesses and redundant employees are paying the price.
My street is becoming very bleak with all the shops and businesses closing and that is in Central London.
Oh, and business rates are up again, surprise surprise.
Thank you Mandelson and Gordon
- Mario Kempe, london, 06/03/2009 10:07
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