Chancellor of the Exchequer George Osborne today revealed his 2012 Budget, which included numerous changes to tax arrangements, a continued commitment to deficit reduction, and a promise to increase exports and business investment.
In a speech to Parliament that lasted just under an hour, Chancellor Osborne outlined a range of “far-reaching tax reforms” aimed at making the UK more competitive.
Mr Osborne said the Coalition wants business to double exports to £1 trillion by the end of the decade. Describing the Budget as one that “rewards work” and “unashamedly backs business”, the Chancellor promised to deliver a “simpler tax system”.
Mr Osborne took the opportunity to slam the Carbon Reduction Commitment (CRC), describing it as expensive and cumbersome. He said that the Government would seek to make changes to simplify the system and, should those fail, it would propose a complete overhaul.
Acknowledging that tax was only part of the story, the Chancellor also promised to back infrastructure upgrades including rail projects in the north of England and highlighted that the Government would be promoting growth in science as providing backing for the UK’s aerospace industry with the development of the UK Centre for Aerodynamics to open next year. The energy sector will also be supported with a strong focus on offshore gas.
Finishing his Budget speech, Osborne said: “This country borrowed its way into trouble and now we’re going to earn our way out.”
Here follows a list of industry-related highlights from today’s Budget address.
- Corporation tax is to be cut by 1% this year. From April corporation tax will be just 24%. The two further cuts will go ahead, so by 2014 it will be 22%. This means corporation tax will be “dramatically lower” than in competition countries. This will put the Government within sight of a 20% rate, which would put corporation tax in line with the basic rate of tax.
- An above-the-line R&D tax credit will be introduced next year. Further details are yet to be released.
- The national deficit was 11% when the Coalition came to power in 2010. This is predicted to fall to 7.6% next year (2012).
- Borrowing this year will come in at £126bn and will fall to £120bn next year. Over the five year period this will be a fiscally neutral forecast.
- Growth forecast has been revised up to 0.8% for 2012 and to 2.0% for 2013.
- 24 enterprise zones are proceeding and enhanced capital allowances will be provided to start-ups in Scotland.
- The cost of patents will be cut in order to encourage the life sciences sector to develop new medicines in the UK.
- £100m will be contributed by government and private investment to improve university research centres.
Terry Scuoler, chief executive of EEF, the manufacturers’ organisation, said of the Budget:
“The Chancellor began positively by setting out his thoughts for a new economic model. But, by the end of his speech, the task of rebalancing our economy looked as daunting as ever. Whilst there are some helpful measures, they fail to send a strong enough signal to growing manufacturers that now is the time to bring forward their investment plans and to do it here. The corporation tax cut is welcome but, on its own, it is not the silver bullet that will unlock the business investment our economy urgently needs.”
John Cridland, CBI Director-General, said:
“The Chancellor has painted a clearer vision of how the UK will earn its living in the future and, by seizing the opportunity to make sure our corporate tax system is more internationally competitive, he has sent a powerful signal to companies to invest, do business and create jobs in the UK.
“An extra one per cent off corporation tax this year could make a big difference to investment intentions. Plans to reduce the top rate of tax to 45p by April 2013 will show our top and aspiring talent that this Government wants them to create wealth here.”
ADS comments on the creation of a UK centre for aerodynamics with £60m.
“The Centre will pull together existing testing and modelling facilities into a coherent virtual centre, and will be responsible for coordinating and supporting world-leading Research and Technology (R&T). Through the identification and development of new technologies, the Centre will pinpoint areas for increased investment to fund research which will ensure that the UK remains a competitive leader in the global aerospace market. In addition the research will de-risk radical new concepts in wing design and help deliver sustainable aviation by supporting the development of new technologies and more environmentally friendly aircraft.
“The £60 million investment will be spread over two years, £10million of which will be capital investment to upgrade facilities, with £50m resource funding for delivering the research.”
Stephen Tetlow, Chief Executive of the Institution of Mechanical Engineers, said:
“With British manufacturing growing by less than 1% in the past year we are still sorely lacking a bold, ambitious industrial strategy to rebalance our economy. This Budget contains some helpful measures but it’s a vision we need, not this piecemeal approach. We’re hearing the right notes, but no tune.
“Some measures announced today deserve to be welcomed. Patent and R&D tax credits will help our most innovative industries, investment in North Sea oil and gas will help our position as a world-leader in deep-sea exploration and a UK Centre for Aerodynamics will help our world-class engineers design and commercialise the next generation of aircraft.”
Stephen Cooper, partner at KPMG, said:
“One of the biggest challenges for manufacturers recently has been the availability of funds to sustain and drive their business, so the announcement of a £20 billion loan guarantee scheme is welcome news. It’s certainly a positive initiative, but how smaller companies will access the funds is the critical issue. Time will tell whether or not this scheme is a success, or whether it merely cuts the rate of interest for those with the capability to borrow.
“The Chancellor’s decision to reduce corporation tax is also a great step towards showing the world that Britain is open for business. Compared to the US, France, Germany and Japan, the staggered reduction means that we are a better place to do business and this will only serve to encourage foreign manufacturers to base themselves on our shores. Whether it makes a difference to smaller and struggling SMEs is, of course, open to question.”
Arnab Dutt, Managing Director, Texane Ltd
“As a small British manufacturer (yes we do still exist), I welcome the reduction in corporation tax but I would have preferred to see a big increase in the tax relief on capital investment to £200,000 and a commitment to keep it there for the next five years.
“At least the Chancellor says that tax relief will now reflect “genuine business losses” but we needed much more to stimulate investment for the future.
“The Chancellor’s promise to “unashamedly back business” with the Budget is commendable, but we will have to wait and see how the banks perform on his credit easing scheme because the biggest obstacle for small firms is the lack of access to capital.”
Paul Medlicott, Head of FMCG at law firm Addleshaw Goddard, said:
“In today’s Budget, the Chancellor announced the introduction of a Patent Box from April 2013. This means that a reduced rate of corporation tax of 10% will broadly be applied to profits attributed to UK patents and related types of intellectual property.
“This will mean a significant reduction in tax payable by technology and other companies which will boost their own expansion and growth, as well as that of the economy, and be particularly welcomed by small innovative businesses in the sphere.
“Already clients who had traditionally taken the decision not to patent their technology for various reasons now feel encouraged to do so. The presence of such inventions in the public domain is also likely to be a boon for the progress of research and development in the UK and to increase its global competitiveness.”