After the previous two years where Chancellor Osborne focused his annual Budget on companies in the UK, this year saw realignment with working households. This met with mixed reviews as his statements previously implied that businesses in the UK are the hope of the future, of pulling Britain out of the financial slump it has fallen into.
In the Budget, businesses were awarded another penny off the corporation rate and a plea to do something about the 50p executive rate was heard. Now it stands at a 45p rate for executives but that 1p did nothing to appease businesses. This year’s Budget did not meet with much enthusiasm in the business sector as opposed to previous years where the applause and approval was ‘thunderous.’
As summed up by Simon Walker, director general of the Institute of Directors, this is a ‘step in the right direction’ but government should be aiming at a reduction in corporate tax to 15p by 2014 rather than the project 22p of this year’s Budget. He further states that the UK continues to be uncompetitive and government is not moving forward far enough or fast enough to resolve the problem.
Mr Osborne put forth a challenge to businesses to uphold its end of the bargain by investing and expanding but according to the Office for Budget Responsibility, this will not happen in 2012. In November of last year there were high hopes as the business investments were expected to grow by 7.6 per cent this year but that number was soon adjusted down to 0.7%.
Now, as businesses continue to hold cash instead of investing, the projections are similar but up by one-tenth to 0.8%. Furthermore, the OBR stated that businesses will not have much to invest which is why their projections were only minimally changed. Whilst the Chancellor had previously been a champion of businesses in the UK, he is now heavily focused on working families and experts believe this has something to do with the OBR’s reluctance to project higher growth.