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Last Updated: Sunday, 9 March 2008, 12:30 GMT
Tories urge corporation tax cut
George Osborne
George Osborne believes a tax cut could help boost competition
Corporation tax rates should be reduced to help revive the economy and boost competition, the Tories have said.

The main rate is due to fall from 30% to 28% in April, but shadow chancellor George Osborne wants it cut to 25%.

Speaking ahead of Chancellor Alistair Darling's first Budget on Wednesday, he said he also wanted to scrap a planned 2% rise in the small companies rate.

Mr Osborne told the BBC that the Tories planned to pay for this by scrapping a number of business tax breaks.

I do not want to see Alistair Darling on Wednesday use either the environment or binge drinking as an excuse for additional taxes

George Osborne, Shadow Chancellor

Interviewed on the Andrew Marr Show, Mr Osborne said that there was currently "no scope" for a big cut in the business taxes because of the UK's budget deficit, which he described as the worst in Europe.


He said: "So I am suggesting a simplification of the system, getting rid of the very expensive reliefs and allowances that exist within the corporate tax system, and using the proceeds to cut the headline rate."

Mr Osborne said the Tories also wanted to keep the business tax rate at 20p for small companies.

The BBC's political correspondent Ben Wright said the Conservatives planned for overall business tax levels to stay the same - meaning the package would be less politically contentious.

He said the business lobby had been critical of the government in recent months and it was a group the Conservatives were keen to court.

Mainstream corporation tax rate is currently paid on annual profits of more than 1.5m.

Further reduction

This April, businesses will see the main rate fall from 30p to 28p, as announced in Gordon Brown's last budget in March 2007, but the Tories believe that there is a good case case for a further reduction.

Mr Osborne also warned the Chancellor not to bring in "stealth taxes" when he targets environmentally-unfriendly behaviour and binge drinking in the Budget.

He said: "What we are saying is if you increase taxes on 4x4s or alcopops then you should reduce taxes elsewhere," he said.

"I do not want to see Alistair Darling on Wednesday use either the environment or binge drinking as an excuse for additional taxes."

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