George Osborne’s eighth budget began on a cautious note as the chancellor warned that the global economy and less than promising growth forecasts meant he had to make tough long-term decisions rather than taking advantage of low borrowing costs to invest. But it was packed with a few decent nuggets of good news – at least from a business perspective.
Osborne announced plans to more than double small business rates relief and make it a permanent fixture – a move he says will mean more than 600,000 small firms will pay no rates at all. He will also introduce two new £1,000 sharing economy allowances for individuals who sell small amounts of goods or services online and who rent out their homes using sites like Airbnb (creating a good headline out of tiny amounts of money that HMRC would never be able to collect anyway).
The chancellor contrasted tax cuts for small businesses with more action on tax avoidance by multinationals and other changes to financial reporting rules which he said would net the exchequer an additional £9bn. At the same time he is cutting corporation tax by another percentage point to 17% by 2020 and capital gains tax will be cut to 10% for basic rate taxpayers and 20% for those on the higher rate (but not on residential property).
‘This is a budget which gets rid of loopholes for multinationals and gets rid of tax for small businesses,’ he said. ‘A £7bn tax cut for our nation of shopkeepers, a tax system which says to the world, "we are open for business."’
The tax tinkering didn’t stop there. Some had suggested the chancellor restore planned rises in fuel duty, which has been frozen for years. But he took the politically easy but financially questionable option of keeping it flat for another year.
Manufacturers of sugary drinks, long criticised for fuelling childhood obesity, will be hit with a sugar levy that the Office of Budget Responsibility estimates will raise £520m per year. That sent shares in Britvic and the Irn Bru maker AG Barr down this afternoon. ‘We understand that tax affects behaviour,’ he said. ‘So let’s tax the things we want to reduce, not the things we want to encourage.’ But there's no mention of why it only applies to soft drinks and not the thousands of other things that are packed with sugar.
With economic uncertainy at perhaps its highest level since the financial crisis, Osborne placed much emphasis on planing for the long-term this year. But with an EU referendum around the corner and troubles on the global economic horizon that's easier said than done.