Chancellor risks fuelling decline with tax raid

While the United States is pulling out all the stops to attract corporations, Jeremy Hunt seems determined to frighten them away

I‘Companies of all shapes and sizes continue to vote with their feet’

f anyone thought Britain wasn’t serious about science and technology, then it’s a good job we’ve got Michelle Donelan. The science minister has just unveiled a war chest that will apparently cement this country’s status as a global “science and technology superpower”.

Presumably it is also supposed to counter the mounting accusations that the Treasury’s giant tax grab is turning Britain into an investment backwater because as Donelan rightly points out, to stand any chance of achieving such a lofty goal, we will need to “build a skilled workforce”, “provide infrastructure and investment” and create “a regulatory environment that supports innovation”.

Good luck with that. When it comes to this Government’s big announcements, it pays to read the small print. How much is being set aside in pursuit of this noble cause? A grand total of £350m. The sum includes a £250m pot dedicated to AI, quantum and biotech – “three critical technologies” where the UK already boasts “global leadership”, apparently; £50m to help universities strengthen their lab facilities; and a dizzying £9m to help set-up a quantum computing research hub.

Instead of demonstrating ambition, it achieves the total opposite. On any measure, £350m is desperately small beer – but when compared with the sort of sums that Joe Biden is throwing at such endeavours, it risks looking like a rounding error.

Meanwhile, all such initiatives, unless they involve truly game-changing amounts of money, risk being completely drowned out by the outpouring of concern over Britain’s diminishing status as an attractive place to do business.

Indeed, companies of all shapes and sizes continue to vote with their feet. The latest is Sheffield-based software star Wandisco, which has joined the growing ranks of companies considering listing its shares on the New York stock exchange.

Ministers may be tempted to dismiss this as a fairly inconsequential event. After all, Wandisco is listed on the junior Alternative Investment Market (Aim), and with a market value of less than £900m, it is hardly Britain’s answer to Microsoft or Google. Its life as a public company has been something of a roller coaster journey for investors too, while management are at pains to point out that its primary quote will remain in London.

Nevertheless, there is no getting away from the fact that it has the potential to inflict long-lasting damage. First, there is obviously a danger that if the company’s shares experience a sharp re-rating once they start trading in the US, there will be pressure to go the whole hog and ditch the UK quote altogether in favour of a main listing across the Atlantic.

This would be felt particularly keenly by a Government that has made a big fuss about trying to compete with Silicon Valley. Though Wandisco is relatively small fry, it is precisely the sort of home-grown, fast-growing tech start-up that ministers are desperate to court.

But it’s the timing that will really smart, coming just days after Arm and building materials giant CRH both set their sights on Wall Street rather than the City. Flutter has also said it is eyeing New York, initially as part of a dual listing but potentially as its primary quote as it seeks to capitalise on a huge gambling boom unleashed by the liberalisation of the American betting market.

It is against this backdrop, that the Chancellor appears to think it is wise to put up taxes. But Jeremy Hunt’s shortsightedness is compounded by Biden’s big business charm offensive. The US has earmarked $280bn (£232bn) purely for the purpose of bolstering America’s semiconductor industry. That’s 800 times more than Donelan has been handed to boost Britain’s science and technological prowess. Biden’s Inflation Reduction Act promises even more – $360bn in lucrative tax breaks to kick-start an American green revolution.

So as the US pulls out all the stops to attract major corporations, the Treasury seems to be determined to frighten them away. No wonder then that warnings about the dangers of plunging Britain into a high tax, low-growth trap are approaching fever pitch as the budget approaches.

Industrialist Sir James Dyson points out that Hunt is actually about to implement a double tax grab. As well as a jump in corporation tax from 19pc to 26pc, the Treasury also plans to “lead the charge” on the Global Minimum tax – a new global levy that sets a minimum 15pc tax rate for subsidiaries of large UK multinationals.

In a letter to the Treasury, published in The Sun, Sir James says: “Is it any wonder ... that companies like Astrazeneca are deciding to take their investment elsewhere?” A reference to the drug giant’s decision to switch plans to build a new £320m manufacturing plant from north-west England to low-tax Dublin.

But he could have just as easily pointed to Shell. New boss Wael Sawan contrasts the “10-year clarity” of Biden’s green deal with the UK, where he would “think twice about investing in more oil” and the energy profits levy has increased Shell’s North Sea tax rate from 40pc to 75pc, he told The

Times. Similarly, while America rolls out the red carpet for foreign investors, Scottishpower boss Keith Anderson warns there is a danger of the UK missing out on “an absolutely colossal opportunity” in offshore wind because of Britain’s convoluted planning rules.

Hunt has talked dreamily about how his so-called Edinburgh financial reforms will “turbocharge” the economy. But the only thing the Chancellor risks turbocharging is Britain’s decline.