Jeremy Hunt to reject calls to extend £10 billion tax cutwritten by Bella Palmer
At the spring budget in March, the chancellor introduced the multibillion-pound “full expensing” investment relief by saying he wanted to make it permanent “as soon as we can responsibly do so” to help kickstart economic growth
Jeremy Hunt is set to reject business calls to use next month’s autumn statement to extend a £10 billion tax cut aimed at boosting corporate investment in the UK, despite growing concerns over the economy.
At the spring budget in March, the chancellor introduced the multibillion-pound “full expensing” investment relief by saying he wanted to make it permanent “as soon as we can responsibly do so” to help kickstart economic growth.
Industry leaders are preparing to use a round of meetings with Hunt this week and next to lobby for the three-year policy to be extended in the autumn statement on 22 November to help counter Britain’s worsening growth outlook.
Nevertheless, it is understood that Hunt will tell bosses that constraints on the public finances mean he is unable to change course after a steep increase in government borrowing costs in recent months.
Although the chancellor is expected to place a heavy emphasis on supporting economic growth and increasing business investment, sources close to the government pointed to the high cost of the policy and the precarious position of the public finances.
Introduced from April to soften an increase in corporation tax from 19 per cent to 25 per cent, full expensing lets firms claim back the cost of investments in IT equipment and machinery by permitting them to write it off against tax on their profits. The policy had an initial price tag of £8 billion this year, while the Office for Budget Responsibility estimated that the cost of making it permanent could approach £10 billion a year.
Hunt has earlier argued that the scheme could be made permanent “when fiscal conditions allow”, but warned this month that “difficult decisions” would need to be made after the worsening of the public finances. The cost of long-term government borrowing on financial markets this month reached the highest levels since 1998.
Nevertheless, the chancellor has come under pressure from Conservative MPs to cut taxes in an attempt to reverse the Tories’ plunging opinion poll ratings.
According to figures from the Confederation of British Industry, private sector activity continued to decline in the three months to October, as per a report published on Monday, amid a downturn across the services sector, distribution, and manufacturing.
Alpesh Paleja, the lead economist at the Confederation of British Industry, said firms were being stifled by high costs, staff shortages and febrile demand conditions. Chronically weak activity underlines the scale of the challenge the chancellor faces to break the UK’s low-growth cycle, he added. Bold action to mobilise the workforce, streamline planning processes, and make full expensing for investment permanent, is vital to boosting UK productivity.
In a separate report, the manufacturing group Make UK said extending the full expensing policy was important for firms for their investment planning. A survey of its members found most were planning to invest in AI and other cutting-edge technologies – but said 40 per cent believed the UK was falling behind international rivals.
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