The Chancellor’s biggest ever policy U-turn appears to have snuck under the radar amid the political resignations, betrayals and leadership bids currently dominating the headlines.
On Sunday, Mr Osborne announced that he plans to cut corporation tax to less than 15 per cent in an effort to attract companies deterred from doing business in a post-Brexit Britain.
Ironically, it was the years of austerity he imposed on savers and SMEs that contributed to last month’s vote and that led us to our current economic predicament. Yet the Chancellor’s response has been the introduction of a policy which will only benefit large banks and corporations.
In the six years since I founded ThinCats, I have met hundreds of small and medium sized business owners, and I firmly believe that reducing corporation tax does nothing whatsoever to help them. It may sound like an overly-used term, but these businesses really are the lifeblood of the economy and the best source of job creation.
Yet most of them would consider it a major achievement to turn enough profit to qualify for corporation tax. If the chancellor genuinely wanted to help business and stimulate the economy, he should have reduced National Insurance or supported schemes to give these SMEs better access to finance.
Now more than ever, the government must recognise how important it is to sustain enterprise across the country, rather than focusing solely on the prospects of the corporate titans of London.
With Britain heading out of the EU, major European-backed infrastructure projects such as the Northern Powerhouse and Midlands Engine stand to lose vital funding. As such, the need for greater economic stimulus in the regions is greater than in the City, where investment is likely continue even without tax reductions.
Many commentators are suggesting that the UK is heading towards another recession. There’s no doubt that the construction industry is facing challenging times, while the manufacturing sector is only just keeping its head above water. If interest rates fall again as expected, small business owners in these sectors, especially in the regions, will find it all the more difficult to access funds, as banks pull up their drawbridges once more.
With George Osborne making such a U-turn on his office-defining policy, the days of austerity economics are over. So why can’t we go back to a time when serious attention was given to boosting the economy by encouraging investment and providing access to finance?
It would be useful if after all these years of hardship, economic development was considered to be a positive thing once again.