LONDON – UK Chancellor of the Exchequer George Osborne declared that Britain is open for business and encouraged foreign investors to come and invest in an economy which according to him is, despite the government's austerity measures, the best-performing in the G8 countries. Delivering his Autumn Statement to a packed House of Commons Wednesday, the Chancellor, who was on his feet for just under an hour, poured scorn on the Opposition Labour Party's perceived ‘tax and spend' approach to solving Britain's dire economic problems, and at the same time took a swipe at French Socialist President Francois Hollande's ‘tax the rich' strategy, which he stressed had both backfired. “Punitive tax rates,” defended the Chancellor, “do nothing to raise money, and simply discourage enterprise and investment into Britain. Other countries on our doorstep are trying that approach and are paying the price. We're not making that mistake. Her Majesty's Revenue and Customs (HMRC) data reveals that in the first year of the 50% tax rate, tax revenues from the rich fell by GBP7 billion and the number of people declaring incomes over one million pounds fell by a half. A tax raid on the rich that raises almost no money is a con. We're going to have a top rate of tax that supports enterprise.” The Chancellor's Autumn Statement is traditionally a key update on the state of the UK economy and government finances and a precursor to the Spending Review, usually a few weeks into the New Year, and of course to the main budget in March. Amidst cries of derision from the opposition benches, Osborne conceded that “it's taking time, but the British economy is healing. After the biggest financial crash of our lifetimes, people know that we face deep seated problems at home and abroad. At home, we live with the legacy of a decade of debt and the failure to equip Britain to compete in the modern world.” In a speech characterized by ‘omnispeak', the Chancellor seemed to blame what's wrong with the British economy on the “multitude of problems from abroad” such as the potential US fiscal cliff, the slowing growth in China and above all the eurozone, which is now in recession. At the same time, on the downsizing of growth and debt repayment forecasts, similarly, he has put the responsibility squarely on the independent Office for Budget Responsibility (OBR). The Shadow Chancellor, Ed Balls, in his response to the Autumn Statement, warned: “Today after two-and-a-half years, people can see the true scale of this government's economic failure.” The British economy, he stressed, is contracting, government debt is rising and the rich are better off because of the Chancellor's policies. Osborne stressed that while there are no quick fixes to the country's economic woes, people also want to know that “we are making progress. And the message from today's Autumn Statement is that we are making progress. It's a hard road, but we're getting there.” The Chancellor has had some help in his figures because they take in the receipts from the imminent sale of the UK's 4G mobile phone spectrum, which is expected to net a £3.5 billion windfall, and which the Chancellor is using to reduce debt rather than for spending. According to the BBC business editor Robert Peston, “if you strip that out he (the Chancellor) would have to have made much bigger cuts to public spending or put up taxes rather more.” The Labour Government of Prime Minister Tony Blair had a similar windfall from the sale of the 3G mobile phone license. The Blair administration similarly used the proceeds to reduce debt, rather than for spending, The statement raised several controversial issues especially a resounding “no” to a so-called “Mansion Tax” (a tax on expensive properties over £2 million) to the chagrin of Nick Clegg, the Deputy Prime Minister, and leader of the Liberal Democrats (LibDems), the junior partner in the coalition government with the Conservative (Tory) Party. The LibDems are committed to this in their manifesto and this issue has been a perennial source of discontent between the two coalition partners. “We've already raised stamp duty on multi-million pound homes,” maintained the Chancellor to the noisy support of his Tory backbenchers, “and next week publish the legislation to stop the richest avoiding stamp duty. But we won't introduce a new tax on property. This would require a revaluation of hundreds of thousands of homes. In my view it would be intrusive, expensive to levy, raise little and the temptation for future Chancellors to bring ever more homes into its net would be irresistible. So we're not having a new homes tax.” This to a certain extent is offset by the Chancellor's new robust regime of tackling the problem of tax avoidance especially by multinational corporations and international firms including household names such as Starbucks, Amazon, Google, etc. During the Prime Minister's Question Time immediately before the autumn statement, British Prime Minister David Cameron confirmed that the government had recovered an extra £4 billion in tax revenues in the last four years by closing down the loopholes on the “strange practices” used by some companies to minimize their UK income and thus avoid tax. This however, is further offset in the other direction by further raids on the welfare and benefits system especially with the introduction next year of a new Universal Credit, replacing several individual benefits such as housing benefit, child credit and disability benefit. “As well as a tax system where the richest pay their fair share, we have to have a welfare system that is fair to the working people who pay for it. The vast majority of people, rich or otherwise, pay their taxes and make their contribution. But there are still too many who illegally evade their taxes, or use aggressive tax avoidance in order not to pay their fair share. This government has taken more action against these people than any before it,” declared Osborne. The strategy seems to be working. Prosecutions for tax evasion are up 80 percent. The government is increasing by around 2,500 the number of tax inspectors going after evaders and avoiders. In 2013, the UK will introduce the first ever General Anti-Abuse Rule and for the first time, the UK Treasury is expecting an inflow of £5 billion over the next 6 years from undisclosed bank accounts in Switzerland held by British citizens and residents. This measure comes under a treaty signed between the governments of the UK and Switzerland, and which according to the Treasury “is the largest tax evasion settlement in British history.” Similarly, according to the Chancellor, hundreds of millions of pounds of tax loopholes are being closed with immediate effect, and HMRC is also investigating abusive use of partnerships. HMRC indeed will not have its budget cut over the next two years, unlike other departments, and instead will receive and extra £77 million for fighting tax avoidance. These resources are also for ensuring that multinational companies pay their proper share of taxes. The UK is leading the international effort to prevent artificial transfers of profits to tax havens and is cooperating with Germany and France is asking the OECD to take this work forward. Britain will also make this an important priority of its G8 Presidency in 2013. In total, the Treasury expects the new tax evasion action will increase the amount of money collected from tax evasion and avoidance by a further £2 billion a year. But, for the business and corporate sector at the same time there was some good news. Osborne stressed that he wants the UK to have the most competitive corporate tax system of any major economy in the world, albeit he expects corporates to pay those corporate taxes. The Chancellor in the last two years, has already cut the main rate of corporation tax from 28 percent to 24 percent, and it is set to fall further to 22 percent. This, he explained, has helped British companies and frankly left other countries scrambling to keep up. “I am today cutting the main corporation tax rate again by a further 1 percent. In America, the rate is 40 percent; in France it is 33 percent; in Germany it is 29 percent. From April 2014, the corporation tax rate in Britain will stand at 21 percent. This is the lowest rate of any major western economy. It is an advert for our country that says: come here; invest here; create jobs here; Britain is open for business,” he declared.
