In its quest for big growth, Britain taxes sugary drinks on budget day
George Osborne holds up his budget case for the cameras as he stands outside number 11 Downing Street, before delivering his budget to the House of Commons on Wednesday. - Reuters
London - Osborne cuts UK company tax and put a levy on sugary drinks in budget
Chancellor of the Exchequer George Osborne announced a further cut in the main rate of UK company tax and put a levy on sugary drinks as he warned the UK 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 per cent by 2020 from 20 per cent now. He also set out higher thresholds for business rates for small companies, seeking to emphasise 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 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 two per cent economic growth this year, as calculated by the Office for Budget Responsibility (OBR), compares with a prediction of 2.4 per cent in November. The economy will grow by 2.2 per cent in 2017 and 2.1 per cent in 2018, compared with the 2.5 per cent and 2.4 per cent 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.
The forecasts by the OBR are "predicated on Britain remaining in the European Union," Osborne said, as he made a direct appeal to voters to keep the UK 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 per cent rate of income tax to £45,000 a year. 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. In the three previous years, borrowing will be £36 billion higher than previously predicted.
"The security of families and businesses depends on Britain living within its means," Osborne said. "We will not burden our children and grandchildren," he said. "This is a budget for the next generation."
Osborne set out plans for a tax on companies producing and importing sugar-sweetened drinks as part of a drive to cut childhood obesity. The levy will raise £520 million, the chancellor said, which will be used to double the amount of cash invested in sport in elementary schools. It will be levied in two bands, on drinks containing five grammes of sugar per 100 millilitres with a higher rate for those with more than eight grammes, he said. - Bloomberg
"Five-year-old children are consuming their body weight in sugar every year, experts predict that within a generation over half of all boys, and 70 per cent of girls could be overweight or obese," Osborne said.
"I am not prepared to look back at my time here in this Parliament, doing this job and say to my children's generation: I'm sorry. We knew there was a problem with sugary drinks. We knew it caused disease. But we ducked the difficult decisions and we did nothing." - Bloomberg
Osborne also announced moves to support the oil industry, including cutting the supplementary charge on oil and gas to 10 per cent from 20 per cent and "effectively abolishing the petroleum revenue tax."