Osborne decides to back business, rather than bash it

  • @mrjamesashton

It took George Osborne a matter of seconds to nail his colours to the mast yesterday. Never mind that this will always go down as a Budget dominated by changes to the personal tax regime. The Chancellor was at pains to say the statement he was about to deliver yesterday "unashamedly backs business".

It is about time. Griping over the activities of our largest companies drove a wedge between ministers earlier this year. Blue-chip bosses were quick to condemn David Cameron's "crony capitalism" rant that attacked fat-cat pay deals.

There has been an uneasy truce, but it left executives approaching the Budget with two things in mind. Sure, the details were important, but Osborne was left in no doubt that the manner in which he delivered the message mattered too. He laid it on thick, with plenty of initial praise, emphasising the need for us to be "earning our way in the world".

Bosses' biggest moan lately was that Britain risks losing its competitive edge because of the high cost of operating here and more nimble, highly-skilled foreign rivals. Slicing corporation tax should make wantaway firms think twice before leaving.

As long as no other country brings in a cut in the meantime, the Oxford University Centre for Business Taxation said that a statutory rate of 22 per cent in 2014 would rank Britain fourth in the G20, behind Saudi Arabia, Russia and Turkey. However, it will still rate just sixth when measured by the effective tax rate which measures the proportion of profit taken from an investment project. We still don't offer as much relief on some infrastructure, despite a drive to repair ageing roads, rail and bridges.

Mr Osborne wants Britain to sell more abroad, pointing out that our share of world exports shrank over the last decade as those of engineering powerhouse Germany grew. So as not to retreat into "economic irrelevance", the aim is to ship more goods and services to the new economic superpowers of Brazil, Russia and India. Doubling the nation's exports to £1trn this decade sounds good, but there wasn't enough detail. At least by putting a new aviation policy for the South-east of England on the agenda means business leaders might still be able to fly direct to some of the far-flung outposts with whom they are supposed to be trading.

Businesses would have done well to approach recent Budgets with caution. Unexpected raids on bankers' bonuses and North Sea oil left bosses wary of "drive by" grabs this time too. There don't appear to have been any significant ones, although banks won't be able to take advantage of the falling corporation tax.

Yesterday's poor borrowing figures for February underlined the fact that Mr Osborne had very little wriggle room before he stepped up to the despatch box. It left some items unlikely to ever make it off bosses' wish lists. But what Osborne has clearly discovered is that backing business, not bashing it, is the best way for the slowly-recovering British economy to eventually slip into second gear.