Hunt poised to delay tax break until autumn
Britain’s biggest investors fear that Jeremy Hunt is poised to delay a crucial tax break until the autumn in a move that would put a wave of private sector spending at risk. Although Treasury sources insisted that businesses will be offered help in next week’s Budget, executives are concerned that a replacement for the so-called super-deduction, an incentive to invest that is due to expire at the end of the month, will be kicked into the long grass.
BRITAIN’S biggest investors fear that Jeremy Hunt is poised to delay a crucial tax break until the autumn, in a move that would put a wave of private sector spending at risk.
Business leaders are concerned that the Chancellor will wait before unveiling a permanent replacement for the “super-deduction”, an incentive to invest due to expire at the end of March.
Although Treasury sources insisted last night that businesses will be offered help in next week’s Budget, executives are concerned that any new measure will only be temporary and a permanent solution will be held up. Sir Nigel Wilson, the boss of Legal & General, described the UK as a “low growth, low productivity” economy, hampered by high regulation and low wages.
Under the super-deduction – an emergency post-covid measure – businesses can cut their tax bill by 130pc of the value of qualifying investment.
Mr Hunt is considering reducing this to 100pc. However, the Treasury has balked at the £11bn upfront cost of this and the potential for it to be abused.
The Resolution Foundation think tank has suggested the plan would eventually pay for itself by driving up investment and increasing productivity. Business groups and the leaders of some of Britain’s biggest companies have held talks with Downing Street officials in recent days. Whitehall is asking experts about the potential design and cost of tax relief options, as well as their likely investment impact.
The Treasury has stressed there is little scope for tax breaks, with the Office for Budget Responsibility expected to downgrade the UK’S growth prospects in its economic forecasts next week.
Sources have indicated that Mr Hunt may opt for temporary measures or a roadmap towards permanent capital allowances rather than an immediate replacement for the super-deduction.
City grandees warned that Britain will enter a terminal decline unless Mr Hunt takes immediate steps to incentivise investment. The Confederation of British Industry (CBI) said that the looming “double whammy” of a corporation tax rise from 19pc to 25pc and the end of the super-deduction has already sent a chill through UK boardrooms.
The CBI, British Chambers of Commerce and Institute of Directors have all warned of the consequences of not replacing the super-deduction, alongside companies including BT, Siemens and Virgin Media.
Sir Martin Gilbert, chairman of fintech business Revolut and co-founder of Aberdeen Asset Management, said that a strong intervention by Mr Hunt is needed.
He said: “We’ve really got to try and get the economy back on a growth agenda by encouraging investment. And if we don’t, I think the decline will continue. The tax burden is just getting too high. And there is no plan for growth. Unless we get one, we’ll just keep slipping further and further behind other countries.”
Mr Wilson said: “We’d like to invest a lot more here in the UK, but a combination of regulation and policy has made it very difficult to do that over the last 20 to 30 years.”
Fresh forecasts from the British Chambers of Commerce showed the UK will dodge a much-anticipated downturn this year.
The economy is only expected to shrink in the first quarter before stagnating, contracting by 0.3pc in 2023 rather than the 1.3pc initially feared.
Such predictions stand in stark contrast to the Bank of England’s assertions that the economy would shrink for five consecutive quarters, or 16 months, from the end of 2022.