If Rishi Sunak and Jeremy Hunt hike corporation tax in next month’s Budget, they will not only cost the Treasury lost revenue but force thousands of small businesses to either pull back on new capital investment and cut jobs, or both.
As well as the corporation tax increase from 19 per cent to 25 per cent, small firms face higher energy costs, late payments from suppliers, business rates which are paid even before companies make a penny in turnover and cuts to R&D tax credits.
Smaller companies also suffer the most from R&D cuts as it is these firms, rather than large ones, which make a bigger contribution to overall innovation.
U-turn: Chancellor Jeremy Hunt lobbied for corporation tax to be slashed to 15% when pitching to be Prime Minister last year
According to the Federation of Small Businesses, the mood among members is lower than at any time since the first lockdown – which is why Sunak and Hunt need to scrap this tax hike that is not only fundamentally flawed, but doesn’t raise more revenue.
Far from it. Figures show that after George Osborne slashed corporation tax from 28 per cent to 19 per cent, tax revenue between 2010 and 2017 doubled from £31.7billion to £62.7billionn.
Surely the Treasury must know these figures? If so, why is Hunt going ahead with raising the tax?
If there are any doubts about why raising corporation tax is such a terrible mistake, he needs a quiet word with Pascal Soriot, chief executive of AstraZeneca, who is not going ahead with the planned state-of-the-art £300million manufacturing facility in the North West of England because corporate tax rates are ‘discouraging’.
Soriot is being polite. What he means is this policy is bonkers. And misguided. What better way to ‘level up’ in the North West than build a new plant creating hundreds of low and high-skilled jobs?
Any other country would be offering Soriot multi-millions in subsidies to build his factory.
It is worth reminding Hunt that he lobbied for corporation tax to be slashed to 15pc when pitching to be Prime Minister last year.
This is what he said: ‘We need to start up Britain now. To send a signal the UK is the most pro-business economy in the world.’
What hypocrisy. The only explanation for not reversing the hike is that Sunak and Hunt are terrified that even the whiff of a tax cut will trigger another Truss-style bloodbath in the bond markets, as seen last autumn.
Yet the situation today is utterly different. We have narrowly avoided recession, interest rates may well be close to peaking and inflation is coming down.
They have a month and a day to wake up and smell the coffee.
High Flying
Arriving back at Heathrow Airport on Sunday night from Barcelona was surprisingly pleasant on just about every count.
It was my first overseas trip since lockdown, the first time I have flown with British Airways (brilliant service) for donkey’s years and the first time landing at Terminal 5.
There was only the tiniest of queues for the non-EU passport control, so no one had the chance to rage or tweet about Brexit.
Staff were on hand to help, directing people to baggage reclaim, while more were outside the exits guiding travellers to the Heathrow Express and the new Elizabeth Line (magnificent feat of engineering).
And it’s fast, traversing London from Heathrow to Liverpool Street station took less than an hour.
What a change not to moan about the state of Blighty. When we build these big projects, we do them brilliantly. Just need more of them.
No wonder Heathrow reports one of the busiest starts to the year since 2020 with more than 5.4m passengers travelling in January. John Holland-Kaye, the outgoing chief executive, is right, saying the airport is back to its best.
Even his claim that 98 per cent of travellers waiting less than ten minutes to pass security last month is believable.
Interesting too that the most popular destination last month was the EU with 1.6m passengers. Those queues don’t seem to have put anyone off travelling to the continent after all.
Holland-Kaye, who was much criticised during the lockdowns, is leaving on a high. The much-maligned BA isn’t doing too badly either. Only the third runway to sort out now.
Give it some welly
Hunter Boot has changed hands more times than most of us buy wellies in a lifetime.
Yet Hunter is doing so nicely that its private-equity owners are looking for new financing ahead of a sale.
Let’s hope that Hunter now finds a British owner suited to its royal warrant. One for Next?
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