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Dublin: 11°C Wednesday 23 June 2021

UK to slash corporation tax rate and offer tax credits for fracking

George Osborne has halved his projections for economic growth for Britain this year, and offers a new mortgage stimulus.

Prime minister David Cameron (left) looks on as George Osborne delivers his Budget speech in the House of Commons today.
Prime minister David Cameron (left) looks on as George Osborne delivers his Budget speech in the House of Commons today.
Image: PA

THE UNITED KINGDOM is to slash its main rate of corporation tax in two years’ time, as it steps up its ambition to encourage foreign investment.

The 23 per cent applying to large companies will be cut to 20 per cent by April 2015. The rate had stood at 28 per cent when the Conservative-Liberal coalition took power in 2010.

The measure was announced as part of Chancellor George Osborne’s 2013 Budget, announced in the House of Commons today.

The budget measures also include new tax incentives to encourage the extraction of shale gas – typically withdrawn through the controversial method known as ‘fracking’ – as an incentive to encourage its exploitation.

The Budget – the first since Britain lost its AAA rating – saw Osborne halve his projections for economic growth for 2013, halving the expected increase in GDP from 1.2 per cent to 0.6 per cent. Projections for 2014 were trimmed from 2.0 per cent to 1.8 per cent.

Budget for an ‘aspiration nation’

Claiming his measures were geared to an “aspiration nation”, much of Osborne’s speech focussed on new tactics to kickstart Britain’s property market.

“What symbolises that more than the desire to own your own home?,” Osborne asked, saying the current difficulties experienced by young buyers in getting mortgages, because of an inability to offer a full deposit, was “not just a blow to the most human of aspirations” but also to construction and social mobility.

The government will offer a 20 per cent loan to people buying newly-built homes worth under £600,000, who can offer their own 5 per cent deposit, with no interest accrued for five years and the balance of the loan repaid only when the house is resold.

A separate government guarantee will be offered for all homeowners who cannot accrue a large deposit, which Osborne said would free up banks to offer mortgages worth an additional £130 billion from 2014 to 2016.

Elsewhere, deeply unpopular levies on fuel and beer – imposed by the previous Labour government, to be increased on an incremental basis – are being abandoned, with a 1p cut on the levy on a pint of beer.

Osborne said the government was looking at other measures to stop the sale of cheap alcohol, but insisted that responsible drinkers should not be expected to pay more because of the behaviour of others.

Column: The success or failure of the UK’s economic strategy matters greatly to Ireland

About the author:

Gavan Reilly

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