Osborne cuts company tax, targets sugar as growth slows

Chancellor of the Exchequer George Osborne (L) leaves 11 Downing Street in London with his Treasury team (L-R) Commercial Secretary to the Treasury Lord O’Neill of Gatley, Exchequer Secretary to the Treasury Damien Hinds, Financial Secretary to the Treasury David Gauke, Parliamentary Private Secretary to George Osborne, Chris Skidmore, City Minister Harriett Baldwin and Chief Secretary to the Secretary Greg Hands on March 16, 2016. Britain's finance minister George Osborne on Wednesday said that the country's economy was set to grow slower than expected this year amid turbulence in financial markets. / AFP / POOL / Stefan Rousseau


Chancellor of the Exchequer George Osborne announced a further cut in the main rate of U.K. company tax and put a levy on sugary drinks as he warned the U.K. economy will grow less quickly in each of the next five years than previously forecast.
In his annual budget speech to the House of Commons, Osborne said corporation tax will be lowered to 17 percent by 2020 from 20 percent now. He also set out higher thresholds for business rates for small companies, seeking to emphasize his Conservative Party’s image as the champion of enterprise, while tightening loopholes that allow multi-national corporations to avoid tax.
“This is a Budget which gets rid of loopholes for multinationals and gets rid of tax for small businesses,” Osborne told lawmakers in London on Wednesday. “A 7 billion-pound tax cut for our nation of shopkeepers. A tax system that says to the world: We’re open for business. This is a government that’s on your side.”
The expected 2% economic growth this year, as calculated by the Office for Budget Responsibility, compares with a prediction of 2.4 percent in November. The economy will grow by 2.2 percent in 2017 and 2.1 percent in 2018, compared with the 2.5 percent and 2.4 percent seen four months ago, he said, while arguing that his stewardship for the past six years has put Britain in a good position to deal with global headwinds.
EU Appeal
The forecasts by the OBR are “predicated on Britain remaining in the EU,” Osborne said, as he made a direct appeal to voters to keep the U.K. in the 28-nation bloc in the June 23 referendum.
The country faces “a dangerous cocktail of risks but one that Britain is well prepared to handle if we act now,” the chancellor said.
“We can choose to add to the risk and uncertainty or we can choose to be a force for stability. Britain can choose short-term fixes and more stimulus or lead the world with long-term solutions to long-term problems.”
The finance minister was seeking to strike a balance between spending cuts and sweeteners to reassure the electorate and members of the Tory party as the divisive EU referendum approaches. The deteriorating growth prospects and lower-than-forecast tax revenues have limited his options, but he was able to announce an increase in the starting point for the higher 40 percent rate of income tax to 45,000 pounds a year.

Deficit Forecasts
The budget deficit in the year 2015-16 will be £72.2 billion, compared with a forecast in November of £73.5 billion, Osborne said. It will then be higher than predicted at £55.5 billion in 2016-17 and £38.8 billion in 2017-18, he said, citing the OBR.
Osborne said Britain will have a surplus of £10 billion in 2019-20, compared with a forecast of £10.1 billion, meeting a commitment, now enshrined in law, that he would deliver one by 2020 — the first since 2001. Cuts to government spending of £3.5 billion were effectively post-dated to 2019-20.

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