And they are to introduce a special 10% corporation tax rate on income which arises from patents in Britain and it is in direct competition with Ireland’s 12% corporation tax rate.
Despite warnings by ratings agencies that debt has to be reined in, Finance Minister Alistair Darling revised up his borrowing forecast for this year to a record £177.6 billion (€196.13bn) or 12.6% of GDP, from £175 billion. Next year’s borrowing forecast was also revised up by £3 billion in a pre-budget report that would normally be full of populist giveaways given an election is due in less than six months and Labour is well behind in opinion polls.
Darling tried to set out Labour’s electoral pitch, promising to protect schools, hospitals and the police from the sharp spending cuts that will have to be felt almost everywhere else. He also talked about getting the wealthy to pay their share, trying to draw a distinction between Labour as the party of hard-working families against a Conservative Party it says is more interested in protecting the interests of the rich.
“The biggest burden will fall on those with the broadest shoulders,” Darling told parliament.
Markets are assuming the Conservatives will be in power by June and know that many of Labour’s policies may never come to pass. But almost everyone agrees that big spending cuts and more tax rises will be inevitable whoever wins the election.
With Darling’s overall package fiscally neutral – neither pumping in money nor taking it out of the economy – analysts said the harshest measures to cut debt would be taken after the election.
“He has ... missed the opportunity to increase the UK’s credibility by reducing the public deficit earlier,” said Richard Lambert of employers lobby the Confederation of British Industry. “We are no clearer today as to how the government plans to reduce public expenditure.”