Hunt plans tax breaks for business amid worry on economy
JEREMY Hunt could use the Budget to announce tax breaks for business investment amid a clamour for action to revive the UK’s economic fortunes.
The move will be welcomed by industry but the Chancellor looks set to disappoint bosses and Tory MPs, who also want him to cancel a planned rise in corporation tax.
Reports of Mr Hunt’s intentions came as Legal & General chief executive Sir Nigel Wilson became the latest to lament Britain’s economy falling behind rivals.
‘For 20 to 30 years we’ve underinvested in the UK – and we want to put the great back into Britain,’ said Sir Nigel, who wants new rules allowing the insurance industry to pour tens of billions of pounds into infrastructure to be brought in without further delay.
British industry received a boost yesterday as it emerged that German car giant BMW was putting the finishing touches on an investment package worth up to £500million for its Oxford plant, securing production of the Mini at the site, according to Sky News.
Yet the wider picture in the UK is more challenging. At the same time, the US is pouring hundreds of billions of dollars into subsidies for net zero industries and the EU has set out plans to respond on a similar scale, policies that it is feared could lure companies away from Britain.
The Institute of Directors has argued that the UK should come up with its own version of the Biden administration’s policy, which is called the Inflation Reduction Act.
Steve Hare, chief executive of UK-based business software giant Sage, yesterday backed the use of tax incentives to help. ‘We have to set ourselves out to be the best place in the world to set up and run a business,’ he told the BBC.
Those concerns are likely to be only partly allayed by Mr Hunt’s apparent plan to introduce new tax incentives for business investment in the Budget next Wednesday.
Business leaders and Tory backbenchers have been demanding that the Chancellor cancels a planned rise in the rate of corporation tax from 19 per cent to 25 per cent.
They say the increase is the last thing needed by firms struggling to keep their head above water amid soaring energy bills, spiralling wage demands and rising interest rates – and at a time when the economy is predicted to be entering a recession. Tory MP John Redwood said tax breaks on their own were not enough.
‘He must stop the rise,’ he said. ‘Just giving the break to put the investment in is insufficient.’ Business leaders fear that firms are facing a ‘double whammy’ in April when corporation tax goes up, while a ‘super-deduction’ tax break for investment comes to an end.
Mr Hunt’s reported plans will address one of those concerns by finding a replacement for the super-deduction, which gives big tax breaks to companies investing in infrastructure and factory and machinery assets. In its place he is said to be considering options such as a ‘full expensing’ regime.
That would allow 100 per cent of such investments to be offset against profits for tax purposes in the first year – less generous than the 130 per cent permitted under the super deduction. A Treasury spokesman said: ‘We keep all our taxes under constant review and do not comment on speculation around tax changes outside of fiscal events.’
‘He must stop the rise’