'UK will have to give concessions' if it is to secure business tax hike to 25%

'UK will have to give concessions' if it is to secure business tax hike to 25%

Britain's Chancellor of the Exchequer, Rishi Sunak, wants to deliver £17bn of annual spending cuts in his budget.

Sterling rose against the euro and the dollar a day after the British government rolled out an expansive annual budget designed to prop up the economy, but it will probably have to offer concessions to businesses if it wants to be able to implement a big hike in corporation tax that is at the centre of the new plan.

A leading think tank, the Institute for Fiscal Studies, also said it was very unlikely that Chancellor of the Exchequer Rushi Sunak would be able to deliver the £17bn of annual spending cuts included in his plan.

IFS director Paul Johnson said if the plan was implemented as announced on Wednesday, Mr Sunak would meet one definition of a balanced budget - borrowing only to invest – by 2025-2026.

"The sad truth is that that would be a balance built on the highest sustained tax burden in UK history and yet further cuts in unprotected public service spending," Mr Johnson said.

"That is perhaps one measure of the difficulties presented by more than a decade of paltry growth followed by the deepest recession in history," he said. Sterling was up against the dollar to $1.398 and to 86.13 pence against the euro.

The UK currency has recovered from its weakest point of around 94 pence during the worst of the Brexit crisis but has nonetheless depreciated sharply from the 72 pence against the euro at which it was trading on the eve of the UK referendum in June 2016. Mr Sunak had delivered on Wednesday what he hopes will be a last big spending splurge to get the economy through the Covid-19 crisis.

The support, which included a five-month extension of Britain's jobs rescue plan, will enable the UK economy to return to its pre-pandemic size in mid-2022, six months earlier than previously forecast, Mr Sunak said.

Sterling is the best-performing G10 currency this year, with investors expecting Britain's speedy vaccination programme will help the economy to recover from its worst annual contraction in 300 years. 

Experts have warned that there is no dividend for Ireland from the UK plans to hike its headline rate of corporation tax to 25% -- exactly double the 12.5% rate in the Republic. 

Economists and business groups say the era of competing for overseas' investments on the basis of low tax levels was over, with US President Joe Biden having also pledged to reverse cuts in US business taxes. 

Reuters and Irish Examiner     

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