Britain’s biggest business organisation described the Budget as “double-edged” despite hailing the “welcome surprise” of moves to bring corporation tax down to 18 per cent.
John Cridland, director general of the CBI, said while businesses would be pleased with the further measures to balance the UK’s books and boost investment they would be “concerned by legislating for wage increases they may not be able to deliver”.
He continued: “The further reduction in corporation tax is a welcome surprise but tax reductions for employers don’t appear to match the businesses most affected by a rise to £7.20 in the national minimum wage next April – a 7 per cent increase.
“The CBI supports a higher-skilled, higher-wage economy, but legislating for a living wage does not reflect businesses’ ability to pay. This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6 per cent.”
Budget 2015: Corporation tax just got cut again
Who will benefit and who will suffer in this Budget?
Protesters block roads around Parliament ahead of Budget
Tax giveaways but severe welfare cuts announced
He added: “Firms want to play their part in training up more apprentices but an apprentice levy is a blunt tool. A volunteer army is always better than conscription but the CBI will work with the Government to make the best effect of this measure.”
Britain’s rate of corporation tax is already the lowest of any large economy in the OECD, but the latest cuts take it within sight of ultra low-tax countries such as Ireland or the Netherlands. Multinationals have caused controversy by using such locations to avoid paying tax in countries where rates are higher.
The Federation of Small Businesses was also lukewarm, describing the Budget as “a mixed bag”. It welcomed the move to increase companies’ annual investment allowance to £200,000 (it had been due to fall to £25,000). But John Allan, the federation’s national chairman, was concerned about the Chancellor’s plan for a “living wage” for the over-25s.
What does five more years of the Tories mean for Britain?
What does five more years of the Tories mean for Britain?
1/8 Welfare payments will be slashed
One of the most controversial parts of the Conservative manifesto was to cut benefits for the working age poor by £12 bn over the next three years. But during the campaign they only said where £2 bn of these savings would come from. That leaves £10 bn still to find. Some experts think the only way they can close that gap is by means testing child benefit – with millions of families losing out
2/8 There will be tax cuts for those in work and those who die
The Tories will increase the threshold at which the 40p rate of tax becomes payable to £50,000 by 2020. They haven’t said so but it is also likely that at some point in the next five years they will abolish that 45p rate of tax altogether for the highest earners. They also want to increase the effective inheritance tax threshold for married couples and civil partners to £1m
3/8 There will be an in/out EU referendum in 2017
The next two years are going to be dominated by the prospect of a referendum on Britain’s membership of the EU. First off David Cameron has the daunting task of negotiating a deal with other EU leaders an acceptable deal that he can sell to his party so he can go into the referendum campaigning for a ‘yes’ vote. This may be unachievable and it is possible that the Tories may end up arguing to leave. Opinion polls show Britain is divided on EU membership, one poll this year showed 51% said they would opt to leave compared to 49% who would vote to stay in
4/8 There will be more privatisation of the NHS
Having won the election the Tories now have a mandate to go further and faster reforming the NHS. In order to make cost savings there is likely to be greater private involvement in running services, while some smaller hospitals may lose services they currently provide like A&E and maternity units
5/8 There will be many more free schools – and traditional state schools will become a thing of the past
The Tories plans to create 500 new free schools and make 3,000 state schools become academies. They will also carry on reforming the Department of Education and remove more powers from local authorities over how schools are run
6/8 On shore wind farms will be a thing of the past and fracking will be the future
Government spending on renewable energy is under real threat now the Lib Dems are no longer in power with the Tories. Subsidies are likely to be slashed for off-shore wind farm and other green energy supplies. Meanwhile there will be generous tax break for fracking as ministers try and incentivise the industry to drill for onshore oil and gas
7/8 There maybe more free childcare – but not necessarily
In the campaign the Tories pledged to double the amount of free early education for three- and four-year-olds from 15 hours a week to 30. The extra hours would only be offered to working families where parents are employed for at least eight hours a week. However they have not said where the money will come from to fund the pledge
8/8 Workers' rights could be reduced
The Tories want to slash business regulation, merge regulator and cut costs. The Lib Dems stopped them from reducing the employment rights of workers in power – but these are now under threat
“Even though offset by a welcome increase in the employment allowance, some will find the new national living wage challenging,” he said. “Changes to the treatment of dividends will also affect many of our members,” he added.
But the Institute of the Directors said that it was time to increase pay after several years in which take-home pay had risen slowly, if at all.
Simon Walker, director of the IoD, said: “In today’s Budget, George Osborne has offered business a new deal on employment. Introducing a national living wage at a significantly higher level than the minimum wage was a dramatic announcement; but, in return, companies have been provided with a cut to corporation tax and an increase in the employment allowance. We should not understate the boldness of this move, and many businesses will have been taken by surprise, but the IoD accepts that after several years of slow wage rises, now is the time for companies to increase pay.”
Budget 2015: George Osborne's Budget speech in full
Osborne promises £8bn more annual funding for NHS
Students react to maintenance grants being scrapped
Universities will be allowed to raise fees beyond £9,000
Bankers, however, rounded on the Chancellor’s decision to impose an 8 per cent tax on bank profits.
Anthony Browne, chief executive of the British Bankers’ Association, welcomed the decision to reform the hated bank levy, saying the move would “reduce the damage it does to Britain’s biggest export industry”.
But he added: “Introducing yet another bank-specific tax will reinforce fears that Britain is becoming a less attractive place for banks to do business. This is the fifth new bank-specific tax measure in as many years following fast on the heels of the big rise in March and will increase banks’ tax burden by nearly £2bn.”Reuse content