BUDGET ANSWERS · BUSINESS
What would cutting corporation tax to 20% cost?
Short answer: About £18.8bn a year in lost tax, before anyone changes their behaviour. After five years, the government is borrowing £24.0bn a year more than if nothing had changed, because the economy and debt interest respond too.
The direct cost
We tested cutting the main rate of corporation tax from 25% to 20% in the first Budget and kept it for the whole term. On paper that costs about £18.8bn a year. About £3.9bn a year per point once collected. Big rises shift profits abroad, so each extra point raises less. Lower rates encourage investment, which builds productive capacity over several years; higher financing costs can offset that. Part of the cost falls on shareholders.
After five years
Direct costings stop at the first year. The game keeps going: prices, jobs, pay, interest rates and debt interest all respond, and some of the money comes back or leaks away.
| Measure | With the change | No change | Difference |
|---|---|---|---|
| Annual borrowing | £83.0bn | £59.0bn | +£24.0bn |
| Debt as a share of the economy | 97.2% | 95.1% | +2.2 pts |
| Household living standards (index, 100 = today) | 101.62 | 101.35 | +0.27 |
| NHS access (index, 100 = today) | 99.9 | 100.0 | −0.1 |
Ten years on
Ten years on, the model does not judge the country better off than if nothing had changed: any gains were bought on credit, leaving debt higher than if nothing had changed.
| Measure | With the change | No change | Difference |
|---|---|---|---|
| Household living standards | 103.19 | 102.85 | +0.34 |
| NHS access | 99.9 | 100.0 | −0.1 |
| Housing, transport, justice and schools | 99.8 | 100.0 | −0.2 |
| Military readiness | 100.0 | 100.0 | 0.0 |
| Size of the economy | 100.37 | 100.00 | +0.37 |
| Debt as a share of the economy | 92.7% | 87.5% | +5.2 pts |
Would voters thank you?
Popularity and results are different tests. Here is how each of the game’s three publics would vote with only this change made.
| Public | With the change | No change |
|---|---|---|
| Services & support | 51.8% | 52.0% |
| Lower taxes | 52.0% | 52.0% |
| Mind the books | 50.8% | 52.0% |
How this was worked out
These figures come from the game’s simplified model, anchored to OBR March 2026 fiscal totals, with no external shocks and every other policy left as inherited. They are illustrative, not an official costing. Real outcomes depend on the wider economy and the choices made alongside. Read the model register for sources and assumptions.
In the game you make five Budgets, face a shuffled deck of world events, and are judged twice: by voters on election night and by the country ten years later.