Dated: 23 March 2011

The IoD supports the Chancellor’s Budget for growth and welcomes the acceleration in the reduction in Corporation Tax to 26 per cent. The IoD also welcomes the very clear statement that the 50 per cent rate of Income Tax is a temporary measure. The 50 per cent rate will damage long term economic prospects and needs to be repealed as soon as possible. Both these announcements will begin to change the perception of the UK as a high tax economy. The reduction in fuel duty will also be welcomed by businesses – small and large – that are experiencing a sharp increase in their cost base.

Commenting on the Budget measures, IoD Director-General Miles Templeman said:

“We welcome the raft of supply side measures announced in the Budget. The combination of reduced Corporation Tax and planning liberalisation will help to lift business confidence at a difficult time. However, the scale of deregulation in areas that really matter to business in general, such as employment law, is still very limited. And while the 21 new enterprise zones have real potential, we question why the whole of the UK can’t be an enterprise zone.

Miles Templeman also said:

“This was a Budget aimed at changing perceptions and boosting business confidence about long-term economic prospects in the UK. The Chancellor didn’t have much money to play with but he played his hand well”.

Key IoD points on Tax

• The Government is right to maintain its course on reform of the controlled foreign companies regime, and to offer an optional exemption for foreign branches. The move towards a system that concentrates on taxing UK profits, rather than foreign profits, in the UK, is a sensible one.

• Extension of the short-life assets period to 8 years is a sensible measure. It will reduce the number of occasions on which capital allowances under-allow for the cost of assets over their lives.

• It is sensible to consult on merging the operation of income tax and national insurance. But it seems that a simple merger of the taxes is not on the cards. We hope the Government will still have the courage to explore the scope for radical simplification short of a full merger.

• We welcome the doubling of the limit on entrepreneurs’ relief.

• We welcome the decision not to link the 2012 increase in the income tax personal allowance to a decrease in the threshold at which people start to pay higher-rate tax.

Key IoD points on Pensions

• The move to a flat rate pension is to be welcomed. We have long argued against the arcane complexity presented by the current system, where means tested retirement income benefits provide a disincentive for private saving.