There is no point counting on the government to rescue us from the economic quicksand we’ve fallen into. That much is pretty obvious from all the Budgets we’ve had since 2008. There has been plenty of hype around all the much-vaunted schemes, and frameworks, and consultations, and policies that are designed to stimulate growth/ cut red tape/ support small businesses / restore competitiveness / support UK manufacturing (please tick all that apply). But the reality is that over 1,000 small businesses are still failing a month, 2.67m people are unemployed (8.4% of the British population) including, depressingly, just over one million 16-24 year-olds, putting the unemployment rate for that age group at 22.5%, and the economic growth forecast this year (which may well prove to be too optimistic anyway) is an anaemic 0.8%. Today’s Budget was essentially just another fiscal fiddling round the edges.
Firstly, there was the new ‘above the line’ (whatever that means) research and development tax credit (hello, has anyone told the chancellor that only 12% of eligible companies actually make use of R&D credits because the regime is so complicated? But I suppose it’s easier to be generous with a tax relief that no one claims anyway.)
Then there was the usual noise about making the rich pay more – there will be a crackdown on wealthy people who hold houses worth more than £2m in companies (15% stamp duty rate – ouch) or who have houses worth more than £2m full stop (7% stamp duty rate). But who doesn’t think these people will find clever ways to get round that particular legislation? There is a reason why accountants are very well paid.
Meanwhile, the 50p tax rate is being cut to 45p because surprise, surprise, it didn’t generate much money. Apparently £16bn of income was shifted to the previous tax year, causing a ‘massive distortion’, according to George Osborne. (Please see my earlier point: there is a reason why accountants are very well paid.)
Then there is the headline-grabber – cutting corporation tax to 24% from next April. But the government has had a clear corporation tax-cutting agenda for a while and I’m not aware that there has been a massive flow of big companies into the UK (I would be interested to see any research on this). In theory, the idea of cutting corporation tax is a good one as big companies supposedly create jobs, but the reality is that many big companies are sitting on some very tidy cash piles as a result of vigorous cost-cutting programmes that have seen them boot plenty of staff out of the door (see earlier unemployment figure) and burden their remaining employees with ever-increasing workloads while freezing pay at the same time. Will a corporation tax cut encourage them to hire more or will they swallow up the saving, thank you very much, and pass it on to their shareholders in exchange for handsome bonuses for the executive team? I will leave that for you to decide.
It is obvious to me that George is scraping the bottom of the barrel when it comes to finding ways to stimulate the economy. The government has been firing every weapon it can find over the past four years, but we’re still losing the war. I have a radical suggestion for you, George, which was once posited to me when I was editing Accountancy magazine. Why don’t you increase inheritance tax to 100% and decrease income tax to 0%? We’ve heard about the rich and the poor sharing the burden; we haven’t yet heard about the living sharing it with the dead.