No sooner was the ink dry on my first update when Boris announces a major change.
To recap, the 17% Corporation Tax rate by 2020 was in the Corporation Tax roadmap and had been passed in Finance Act 2016. So to freeze the rate at 19% is a significant change in Government policy. It also appeared to catch Cabinet Ministers unaware as one had been arguing that reduced tax rates increase revenues in a breakfast interview that morning.
The political logic of the move is clear. Boris is chasing constituencies in the Midlands, Wales and the North of England where spending on the NHS is more popular than tax cuts for corporations. He also deliberately wanted to get the policy out before the launch of the manifesto rather than have it overshadow the launch which is what happened to Theresa May’s ill-fated social care reform.
A number of cuts to business taxation are likely to be in the Conservative manifesto, namely:
- Increase in the employment allowance to £4,000
- A reduction in business rates for smaller enterprises
It is however notable that the employment allowance has been limited to companies with secondary NIC bills of below £100,000 so again the tax breaks to businesses are very much concentrated on the smaller ones.
A further announcement was made in respect of a tax on development gains so that development gains from planning consent will be shared equally between the local authority and the landlord.
In each of the tax rises, Conservatives can point that both Labour and the Liberal Democrats are looking for substantially larger increases in tax which means that those affected have no realistic alternative.
The dynamic of this campaign has so far been for significant public expenditure rises promised by all parties. We were expecting tax rises to be outlined by Labour and the Liberal Democrats, perhaps the surprise is that the Conservatives have also followed with some tax rises albeit not of the same scale.