George Osborne cuts corporation tax – but OBR downgrades UK growth forecast as he warns “storm clouds are gathering”
George Osborne has warned of "storm clouds gathering" in a wide-ranging Budget speech in which he cut growth expectations, but delivered a sop to the UK's firms by cutting corporation tax again.
During his Budget speech in parliament today, he reduced corporation tax to 17 per cent, the second such cut in less than a year.
"Britain is blazing a trail, let the rest of the world catch up," he said.
Osborne also more than doubled the threshold for small business rate relief to £15,000, which he said would take 600,000 small firms out of business rates.
The chancellor also unveiled swingeing changes to stamp duty for firms – which he said will allow 90 per cent of small companies to pay no or less business rates.
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"This is a tax system which says to the rest of the world, we're open for business," he said.
As expected, Osborne hiked insurance tax by 0.5 percentage points – which he said he will spend on flood defences.
In all, he said he will cut £3.5bn from the UK's spending, during a speech in which he warned that "storm clouds are gathering again".
The figure was less than the £4bn expected – but the chancellor added: "Our response to this new challenge is clear – we act now, so we don't pay later."
Figures by the Office for Budget Responsibility (OBR) bore this out – Osborne said the organisation was downgrading UK economic growth from 2.4 per cent to two per cent in 2016, and to 2.2 per cent in 2017, from 2.5 per cent. It also cut its inflation forecasts to 0.7 per cent this year.
The OBR also warned on the implications of a Brexit, saying a departure from the European Union would lead to "disruptive uncertainty".
But in introductory remarks, Osborne said the economy was "on course for a Budget surplus".
"However strong the headwinds, we have held to the course we have set out," he said.
"In this Budget we choose the long-term, we choose to put the next generation first."
Indeed, earlier today Osborne told the Cabinet it was a Budget for "the next generation", adding that we are in "turbulent times" for the global economy.
He has called the Budget "pro-enterprise, pro-infrastructure, pro-devolution".
"[It] fully lives up to what this government is about: transformation."