Budget revolt as Jeremy Hunt presses ahead with ‘chilling’ corporation tax rise

Mr Hunt will say: “In the autumn, we took difficult decisions to deliver stability and sound money. Today, we deliver the next part of our plan – a Budget for growth.

“Not just growth from emerging out of a downturn. But long-term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people. All whilst making our country one of the most prosperous in the world.”

But Simon Clarke, the Tory MP and former Truss Cabinet minister who helped set up the pro-tax cuts Conservative Growth Group, issued a warning shot on Tuesday night.

Mr Clarke told The Telegraph: “There are some very welcome policies in this Budget, but it is also the case that there is real concern about the corporation tax rise in particular.

“This is a tax on jobs and growth. It is very hard to see how it doesn’t have a chilling effect on the whole economy in a way which will cost every family in the country.”

Boris Johnson has been among those Tory MPs who have called for the corporation tax rise to be abandoned, even though it was initially announced when he was prime minister.

His response to the measures will be closely watched, as will that of Liz Truss, who has avoided interventions in recent weeks but defended her tax-cutting agenda earlier in the year.

Mr Hunt and Rishi Sunak, the Prime Minister, inherited economic turmoil from Ms Truss last October, and taxes were raised markedly to calm markets.

The Confederation of British Industry, one of the country’s leading business groups, has been among industry voices warning about the impact of the corporation tax rise.

The economic backdrop has improved since last autumn, with the Office for Budget Responsibility (OBR) expected to predict a shorter and shallower UK recession this year.

Stronger than expected tax receipts and falling energy costs will give Mr Hunt some money to play with. However, Treasury insiders have stressed that the scale of interest payments on government debt remains high.

Push to get people back to work

At the centre of the Budget will be a push to get people back to work, amid alarm in Whitehall at how many people dropped out of the labour market during the Covid-19 pandemic.

A substantial increase in how much people can put aside for their pensions each year and save overall in a lifetime while minimising tax is expected, in a move hoped to dissuade people from early retirement.

Companies will be encouraged to carry out annual health checks in a bid to keep the workforce healthy, while work coaches will be offered to more jobseekers on benefits.

The energy price guarantee, which effectively caps yearly bills at £2,500 a year, is set to be extended to the end of June, while an extra £5 billion on defence spending will be confirmed.

The Telegraph can also reveal the Budget will include measures to ease the impact of EU “nutrient neutrality” rules blamed for delaying construction of 120,000 homes.

A new idea called local nutrient neutrality credit schemes will be floated in the Budget, which could help developers hit requirements to show they have mitigated the pollution impact on waterways.

Hundreds of thousands of workers will stage a strike on Wednesday in what threatens to be the biggest walkout since the current wave of industrial action started last year.

On Wednesday, it emerged that public sector pay is growing at its fastest rate in 17 years. Salaries were 4.8 per cent higher in the period from November to January than they had been a year earlier, according to the Office for National Statistics.