George Osborne signals tax cuts to tackle 'forces of stagnation'

GEORGE Osborne has given his strongest signal yet that tax cuts will be included in his March budget, to tackle "the forces of stagnation" in the economy.

The Chancellor said he wanted the most competitive business tax regime of any major western economy when he spoke to business leaders at the World Economic Forum in Davos, Switzerland, yesterday.

At the end of a week that saw Britain on the brink of a double-dip recession, Mr Osborne suggested he would follow a tax-cutting agenda to stimulate growth.

Although the need to tackle the 155 billion deficit remains the Tory/Lib Dem government's overriding priority, Mr Osborne responded positively to calls for lower taxes and less business regulation.

The Chancellor said he would be as "bold" in unleashing enterprise as he had been in cutting the deficit.

Mr Osborne said he was "very conscious" of the effects of current levels of personal tax adding that he wanted "the most competitive business tax regime of any major western economy".

He said: "The ambition of my Budget on 23 March will be to turn the tide on the forces of stagnation. And the guiding principle as I put the Budget together will be 'the future favours the bold'."

His speech was welcomed by business organisations and led to speculation that the Chancellor was planning to quicken his proposals to cut corporation tax from 28 per cent to 24 per cent in an attempt to help businesses.

On personal taxation, Mr Osborne may also follow the route recommended by his Lib Dem partners and raise the personal allowance from 6,000, a move that would see tax scrapped on earnings up to 10,000.

The government is also considering a reduction in the 50p tax rate currently imposed on people taking home a taxable income of more than 150,000.

The Chancellor yesterday described the taxes inherited from the Labour government as "unsustainable" and said "the creeping march of regulation has slowly undermined our entrepreneurial spirit".

CBI Scotland director Iain McMillan said: "The CBI has been saying for some time that our levels of tax have become too high, so the Chancellor's words are heartening. The top priority, however, is to improve the public finances."

Figures released this week showed that the UK economy has slipped back into negative growth, with a -0.5 per cent contraction in GDP recorded for December last year.