Britain’s coalition government canceled a planned rise in fuel duties and accelerated and deepened previously announced cuts in corporate tax rates in what Chancellor George Osborne dubbed his “budget for growth.”
Osborne told Parliament on Wednesday that the country’s corporate tax would be cut to 23 percent by 2014 from 28 percent currently.
“Let it be heard clearly around the world — from Shanghai to Seattle and from Stuttgart to Sao Paolo — Britain is open for business,” Osborne declared as he announced the changes in his annual budget to lawmakers.
By raising taxes on oil companies by some £2 billion, the coalition of Conservatives and Liberal Democrats can cut prices at the pump. Hikes in alcohol and tobacco duties planned by the previous Labour government will not be reversed though.
Almost immediately after it assumed power, the British government introduced an emergency budget that was designed to “pay for the mistakes of the past,” as Osborne put it. It included increases in value added and capital gains taxes along with heavy austerity measures that were designed to restore fiscal balance by 2016.
Britain’s bloated public sector and costly welfare system expanded under successive Labour governments during the last two decades, undermining the country’s competitiveness. Prime Minister Gordon Brown plunged Britain further into debt at the onset of the recent financial crisis with bank bailouts and stimulus measures.
In an effort to simplify the tax code, 43 different tax reliefs will be scrapped but the government is introducing a shared equity scheme in the housing market to help first time home buyers purchase properties.
Osborne more than doubled the number of planned “enterprise zones” from ten to 21. Set up in deprived parts of England, these areas would benefit from relaxed planning laws and discount business rates to encourage job creation.
Enterprises zones were introduced by Margaret Thatcher’s government in the 1980s. Eleven such zones were established in 1980 and an additional thirteen in 1982, all in blighted neighborhoods and exempt from regular planning controls and taxes. Their effect on job growth was limited except for the London Docklands, largely derelict thirty years ago but now booming with commerce and luxury apartments.
Britain’s coalition government has already begun deregulating burdensome labor laws, making it easier for businesses to hire and fire workers. Under last year’s spending review, nearly two hundred publicly funded bodies supposed to facilitate the arts, education, the environment and health were scrapped and another 118 have been identified for merger.
Amid heavy spending cuts and tax relief for businesses, Osborne had to adjust his growth forecast for 2011 from 2.1 down to 1.7 percent, prompting criticism from the opposition. “Every time he comes to this house, growth is downgraded,” said Labour leader Ed Miliband.
Despite allegations of “unfair” austerity measures, the British state is estimated to borrow close to £150 billion this year. The national debt is expected to equal 60 percent of national income, rising to 71 percent in 2012 before falling to 69 percent by 2015.