Pressure for the Chancellor to come up with some ideas for how to kick start the economy has been growing in recent months, not least because the government recently admitted that its austerity drive will have to continue into the next parliament. But in today's Autumn Statement, Osborne managed to pull some plans out of the bag that the business community probably won’t sniff at.
The headliner point was that corporation tax will be cut by a further 1% to 21% from April 2014, meaning the UK will have the lowest rate of corporation tax in the G8, and, according to Osborne, ‘lower than any other major economy’. And as if to try and shove a dummy in the naysayers’ mouths, he iterated that banks would not simply be able to sweep up the tax saving, as their levy will be increased at the same time.
It probably hasn’t escaped anyone’s notice that public outcry surrounding the little or no corporation tax paid by several foreign companies (Amazon, Starbucks, Google et al) is at fever pitch. Osborne responded to this explaining that ‘hundreds of tax loopholes are closed with immediate effect’ (whatever that means), and that £77m of extra funding has been directed to HMRC to help it chase down corporate tax avoiders. He reckons that tightening up on dodgy accounting methods will help raise an extra £2bn a year from foreign corporations. Furthermore, he revealed that a treaty has just been signed to repatriate £5bn worth of cash that had been off-shored by companies in Switzerland – the largest tax evasion settlement in British history.
In other sections of the statement, Osborne revealed that the funding for Local Enterprise Partnerships is increasing, budget for UK Trade and Investment is increasing by 25%, and that there will be a new £1.5bn export finance facility to help support businesses selling goods overseas. Vince Cable’s much-mooted business bank, conceived to help small businesses find credit where banks would not give it, will receive an extra £1bn capital on top of the billion already earmarked for it. In infrastructure, the chancellor announced £1bn worth of investment in roads infrastructure; £1bn loan and guarantee to extend the Northern Line to Battersea Power Station (creating more jobs); a £10bn guarantee for 120,000 new homes; funding for the roll out of superfast broadband to 12 cities including Oxford and Salford; 100 new free schools; and £1bn for improvement to existing schools.
All in all, the autumn statement has not provided any great windfalls to anybody, and the amounts being earmarked for infrastructure investment are not mind-blowing given that they will be spread over the next three to four years. Critics will no doubt view it as a toothless plan which won’t help all that much. Not to mention that Osborne also admitted he has missed his own target of getting debt as a proportion of GDP to start falling by 2015. And that the Office for Budget Responsibility's growth forecasts are -0.1% for 2012, and a rather optimistic sounding 1.2% for 2013. To some, it will look like we've endured another year of austerity and there isn't all that much to show for it.
Nevertheless, a corporation tax cut and infrastructure investment can only be good for the business community and getting some more people into jobs. Until the blasted economy picks up, business needs all the help it can get.