March 2011 Budget — 29 Mar 2011 at 21:40

The majority of MPs voted in favour of the March 2011 Budget^[1] which included a reduction in corporation tax, a presumption in favour of sustainable development, a cut in fuel duty and an increase in the personal income tax free allowance for those of working age.

The budget outlined government spending of £710 billion for 2011-12 against an expected income of £589bn (a deficit of £121bn).

Key points:

• a reduction in the main rate of corporation tax by a further one per cent. From April 2011, the rate will be reduced to 26 per cent with further yearly reductions of one per cent until 2014 when it will reach 23 per cent;
• £100m for local authorities to repair potholes caused by the cold winter weather;
• increase the rate of R&D tax credits for small and medium-sized enterprises from 175 per cent to 225 per cent by April 2012;
• a new presumption in favour of sustainable development, so that the default answer to development is ‘yes’;
• 21 new Enterprise Zones, to focus growth in specific parts of the UK.
• fuel duty will be cut by one penny per litre from 6pm on March 23.
• a further increase to the income tax personal allowance for under 65s of £630 to £8,105 in April 2012;
• funding for an additional 80,000 work experience placements for young people over the next two years and up to 50,000 additional apprenticeship places over the next four years;
• Changes to the arrangements for tax relief for companies investing in assets; most significantly decreasing the Annual Investment Allowance (under which 100% of asset purchase can be deducted from taxable profits) from £100,000 to £25,000 (expected to raise an extra £1bn/year in extra taxes) and reducing the main rate of Capital Allowances (the fraction over the AIA which can be deducted) from 18 to 8 percent, which is expected to eventually raise an additional £1.7bn/year in extra tax. More than outweighing the costs of the corporation tax cut.
• An announcement of an additional duty on high-strength beers, and a reduced rate of duty on lower-strength beers; as well as an increase of alcohol duty rates by 2 per cent above the RPI on 28 March 2011.

The motion which MPs technically voted to approve stated:

• (1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
• (2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
• (a) for zero-rating or exempting a supply, acquisition or importation,
• (b) for refunding an amount of tax,
• (c) for any relief, other than a relief that—
• (i) so far as it is applicable to goods, applies to goods of every description, and
• (ii) so far as it is applicable to services, applies to services of every description.

The debate was on the budget; the amendments of the law referred to are those required to effect the announced budget.

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• [1] March 2011 Budget documents

Debate in Parliament | Source |