Chancellor Jeremy Hunt said he wanted Britain to have “the most competitive business tax rates” as he faced calls to scrap a planned hike in corporation tax.
Ahead of the Budget on March 15, Mr Hunt said the increase in the main rate from 19% to 25% due in April would still leave the UK with a lower rate than “nearly all” major rivals.
The Chancellor said he wanted to lower the tax burden on businesses, but “it’s not something we’re going to be able to do all in one go”.
Former Cabinet minister Ms McVey asked him if he was “embarrassed, ashamed” to have “the highest levels of taxation in modern history”.
The measures in the Chancellor’s autumn statement in November saw the tax burden rise to its highest sustained level since the Second World War.
Mr Hunt said “it’s not what I want at all”, but he needed to demonstrate a responsible approach to the public finances.
The Chancellor is under pressure from prominent Tories – including former prime minister Boris Johnson – to slash corporation tax rather than hike it by almost a third.
But Mr Hunt played down the importance of the headline rate of corporation tax, saying the focus should instead be on the effective rate, taking into account the allowances open to firms to reduce what they actually pay in tax.
But he added the headline rate “even at 25%, is lower than nearly all our major rivals… France, Germany, and so on”.
Mr Hunt, who pushed for a 15% rate during his 2022 Conservative leadership bid, told the Tory MPs “I want our tax rates to be the most competitive”, but “we can’t get there all in one go”.
Economic stability and a responsible approach to the nation’s finances were needed to lower inflation, he said.
“But if you’re saying to me: is it my ambition for us to have the most competitive business tax rates? Do I want to make progress? Yes, I do.”