It does this by cutting the cost of living and reducing inflation, cutting NHS waiting lists and cutting government borrowing every year so interest rates keep falling. For small and medium-sized businesses, the Budget supports high streets with permanently lower tax rates for 750,000 retail and hospitality properties, backs entrepreneurs by doubling eligibility for tax breaks that make it easier for fast-growing start-ups to scale and stay in the UK, makes the training for under-25 apprenticeships completely free for SMEs and maintains the lowest rate of corporation tax in the G7.
My Lords, yesterday was the benefits Budget. The Chancellor has broken her promise not to increase income taxes. As she said in her Budget, because no national insurance is charged on dividend income, she will increase the income tax on dividends. Does the Minister think that she understands that national insurance is on employed income, for which an employee is paid a risk-free salary, but SME dividends are the reward paid to people who take a risk and invest in their own business to help the business grow? For some reason—perhaps he can explain—she failed to put national insurance on the huge incomes of lawyers and others in LLPs. Does he share my concern, and that of many others in the UK, that she has no understanding whatever of basic economic principles such that she does not understand the difference between salary and dividends that SMEs get for return on capital?
Unsurprisingly, no, I do not agree with the noble Lord. He will remember that, in the last five years of the previous Government, spending on welfare increased by £88 billion. The Government are taking action to ensure income from assets is taxed fairly, narrowing the gap between taxes paid on work and tax paid on income from assets. Those with dividend income pay considerably less tax than those whose income comes from employment or self-employment, as they do not pay national insurance contributions. It is not fair that the tax system treats different types of income so differently, so tax on dividend income will increase by two percentage points. Over 90% of UK taxpayers do not pay dividend tax.
My Lords, we know the vital role that the start-up community, and innovation within it, plays in our economy and its future growth. Would my noble friend talk a little bit more about what the Chancellor did yesterday to help that sector with its scale and stay agenda? Also, declaring an interest as a member of the London Partnership Board, and perhaps playing the Millwall card, may I ask my noble friend to acknowledge the role that London is playing in bearing a share of the burden again that is perhaps disproportionate?
I am very grateful to my noble friend for what he says about the action we took to help scale-up businesses in the UK. As many noble Lords will know, the UK is already a great place to start a business, but our companies are not scaling at the same rate as their US peers and raising less at later-stage investment. As a result, UK companies are either acquired, fail, or choose to go abroad to raise that investment. We will change that and make the UK the best place to start, scale and stay, because today’s fast-growing firms are tomorrow’s engine of jobs and growth. We are doubling the eligibility of our enterprise tax incentives, investing billions of pounds in public capital and delivering reforms to boost the attractiveness of the UK markets, making sure that those companies can access the capital and the talent that they need to succeed in the long term.
My Lords, I am sure the Minister and I will agree that the best way of helping businesses of all sizes is for there to be growth—meaningful growth—over the period. Given the words of the OBR boss, Richard Hughes, this morning on the “Today” programme that none of the measures in this Budget will lead to growth, it is very clear that the OBR does not rate the trade deals, investments in Heathrow or any of the measures as delivering growth over the period covered by the Budget. Where will the growth come from?
I am grateful to the noble Lord for his question. The OBR has upgraded Britain’s growth forecast for this year from 1% to 1.5%, reaching the same conclusion as the IMF, the OECD and the Bank of England, which have already upgraded their growth forecasts. We were the fastest-growing economy in the G7 for the first half of this year, and we are on course to be the second fastest for the year as a whole. He is right that the OBR has looked back at the previous decade and concluded that policies such as austerity and Brexit have weakened the economy more than previously thought, and that assessment then directly impacts its view of GDP for the remainder of the forecast period, but the past does not have to determine the future, and we will go further and faster with our growth mission. We are cutting inflation and cutting borrowing every year of the forecast so that interest rates can keep falling, giving businesses the confidence to invest; we are maintaining public investment to build critical infrastructure; and we are backing our fastest-growing companies. We beat the growth forecasts this year, and we will beat them again.
Well, it is goodbye Budgets for growth and hello tax and spend, is it not? When Ministers are forced back just to reading scripts—completely unedited, as far as I can tell—we get a gist of the sense of lack of authority behind some of the remarks that have just been made. Budgets used to have detailed studies of incentive effects attached to them. Could the Minister tell us, and publish, any such studies of the incentive effects on small business growth for the tax measures in this Budget?
There were several measures to help businesses scale up. The enterprise management incentive scheme will be significantly expanded and made available to more companies. Enterprise investment scheme investment limits and gross asset thresholds will be doubled, and venture capital trust investment limits and gross assets thresholds will also be doubled. The Government will obviously publish impact assessments for all those measures.