Good news for business

Brown Cuts Corporation Tax

Gordon Brown gave business a boost in his Budget when he introduced a 2% reduction in Corporation Tax, taking it down to an all-time UK low of 31%. The reduction will be back-dated to April 1997. The unexpected reduction means that Britain will have a lower rate than all its main competitors, including France, Japan, and the USA.

The stock market registered its approval of the move, closing 23.1 points higher than yesterday. At on stage during Gordon Brown's speech, the FTSE 100-index was up more than 30 points.

Paul Killik, a stockbroker with Killick and Co., thought the reduction could lead to volatile trading on the stock market: "The City welcomed the cut in corporation tax and shares climbed as a result of a knee-jerk reaction to that unexpected reduction," he said. He added that the market needed time to think through the implications of the new rate.

In his own words

William Hague responds to the Budget

Tax credits paid to companies and pension funds are to be abolished in an attempt to encourage firms to re-invest. The leader of the Opposition, William Hague, was not impressed.

"This tax means pension funds will be able to claim less tax back so their revenue will be lower, their growth will be lower and pensions will be smaller. Pensioners will be worse off," he said.

Anne Robinson, National Association of Pension Funds, attacks the "people's budget"

The Chancellor announced that from 1999, individual savings accounts would be introduced. He said the Government's aim was to "encourage the habit of saving in those who have never saved before."

Advanced corporation tax would continue at the same rate, but the foreign income dividends would be axed from April 1999. The tax rate for small companies is to be cut by 2% to 21%. Again, this will be back-dated to take effect from April 1997. Mr Brown said he was creating "one of the most favourable tax regimes for small business of any country."