Britain pledges to be open to foreign businesses

Creating the “most competitive tax system” in the G20, and the best environment in Europe to run a business, were among the plans outlined by Britain's Chancellor (Treasury head), Mr George Osborne, on Wednesday, as he unveiled the 2011 Budget.

“Britain has fallen behind many others in the world in the last decade,” Mr Osborne told Parliament, pointing to the fact that corporate tax rates were among the highest in Europe.

“I want Britain to be the place international businesses go to, not the place they leave,” he added.

As of April, the Government will cut corporation tax by 2 per cent — double the previously announced amount — and will continue to fall by 1 per cent each year over the next three years, down to 23 per cent. This would take it well below the rates of countries such as Germany, France and the US, though still well above that in countries such as Ireland, where the corporate tax rate stands at 12.5 per cent.

The Government is also pledging to slash regulation by cutting some £350 million worth of specific regulations, as well as reforms to the country's planning system.

It will also reform the tax rules governing controlled foreign companies, and apply a 5.75 per cent rate on overseas financing income.

The changes were necessary to ensure the country had “enduring growth and jobs in the future,” said Mr Osborne. As a whole the budget would be fiscally neutral: neither a tax raising nor giveaway plan.

There were a number of sweeteners for the public, including a 1pence a litre cut to fuel duty, a freeze on alcohol and air duties, and an increase in the level of earnings at which income-tax kicks in.

The levy on banks will also be raised to compensate for the cut in corporation tax, another populist move.

However, the nation's economic outlook stood as a shadow over the plans, that from the business perspective, at least, came as a positive surprise. The independent Office of Budget Responsibility has cut its growth forecast for the year to 1.7 per cent, from 2.1 per cent due to a weak end to 2010, rising global commodity prices and unexpectedly high inflation in the UK. Inflation has been soaring in recent months, with the Bank of England's Monetary Policy Committee warning it could go as high as 5 per cent, well above its target rate of 2 per cent.

Unsurprisingly the Opposition Labour Party honed in on the growth forecasts. “Growth is down, down, down,” exclaimed that party's spokesperson on Treasury matters, Mr Ed Balls.

“Growth in the world economy has been revised up, but which is the major country downgrading its growth forecasts?”

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