Rishi Sunak has insisted the UK will be able to attract foreign business despite a planned rise in corporation tax, suggesting he will face off against critical Tory MPs ahead of this week’s budget.
Despite some Tory MPs’ hostility to the planned rise in corporation tax from 19% to 25%, Sunak stressed that Britain would still have the lowest corporate tax level in the G7 , and added that it would remain “a fantastic place to invest to grow a business”.
It came as Jeremy Hunt said there was a ‘difficult road to follow’ to return the UK to prosperity but said his budget would include plans to improve opportunities and grow the economy.
The Chancellor said Wednesday’s budget should create a stable environment for business, but added: “Within the limits of what is responsible, we will always seek to reduce the tax burden.”
Hunt hinted there could be tax measures, but said it should be done responsibly. “Last fall, despite all the challenges we faced, we cut business rates by an average of 10%, so a Conservative government will always cut taxes when they can. But we won’t run out of money. We will be responsible for public finances,” he told Sky.
Treasury Minister Victoria Atkins defended the 25% corporate tax rate on Sunday on Channel 4’s Andrew Neil show.
“We have set the rate at 25% for the top 10% of businesses, but overall we have put in place this permanent annual investment allowance of £1m per year, which will cover up to ‘to 99% of companies,’ she said. “It’s about the effective tax rate, not just the overall tax rate.”
Atkins said most Tory ministers instinctively want to do more to cut taxes. “All our instincts [are] urging us to make the kinds of changes you’re talking about we want to make in the future. It’s just that we have to be fiscally responsible,” she said.
Sunak, speaking to reporters en route to a summit with Australian and US leaders, said he would not be drawn to further details, including a further measure expected next week to see the super deduction – which has allowed companies to offset 130% of plant and machinery capital expenditure against profits – replaced by 100% capital cost allowances.
“I never liked it, when I was chancellor when a budget approached… when the prime minister starts speculating about what a budget would contain,” Sunak said, in a potshot to his predecessors. “I really want to be careful because the Chancellor speaks for himself.”
Hunt has already announced a package of benefits and child care measures to help people get back to work. Parents eligible for help through Universal Credit will now receive initial childcare funding, while it is understood the amount they can claim will increase by hundreds of pounds.
Treasury sources have hinted there may be more to come in the childcare budget, as Hunt has acknowledged the plans announced so far will not help those who do not have Universal Credit. . “We would like to help everyone. It’s expensive to do it. You can’t always do everything at once,” he said.
Hunt reportedly considered increasing the amount childcare providers receive to cover government-set free hours, a key industry demand that has seen many providers go bankrupt.
The chancellor also asked officials to reconsider more free childcare hours for one- and two-year-olds, which had already been rejected as too expensive. Labor has lobbied the government to do more, including a speech by shadow education secretary Bridget Phillipson who suggested Labor would make a big and comprehensive bid at the next election.
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The Treasury also announced over the weekend that it plans to scrap work capacity assessment and replace it with a new system so people with disabilities can try to do extra work without having to undergo a reassessment if they have to quit their job for health reasons.
The plan, which was previously announced by Labor, is being touted as the biggest welfare reform in a decade.
Hunt said on Sunday that the budget would aim to “break down the barriers that prevent people here in the UK from working, whether it’s parents who have barriers because of childcare costs, whether it’s people seniors who feel they need to retire earlier…how long it takes -term patients who find there are barriers to work.
Hunt said there was “no easy solution” for young people struggling with housing and the rising cost of living, but the budget would aim to provide hope.
“We actually have record youth unemployment, there are more jobs available for young people than we have ever had before. We will have to do what it takes to bring down the cost of housing… we have to show young people that having weathered these very difficult storms, having grown up better than many other great countries, we have a plan for the future he told the BBC’s Laura Kuenssberg show.