Britain’s largest investors are concerned that Jeremy Hunt will delay a critical tax cut until autumn, a move that could put at risk a lot of private sector spending.
Concerned business leaders fear that the Chancellor won’t announce a permanent replacement for super-deduction which is an incentive to invest and expires at the end the month.
Treasury sources insist on Wednesday night that help will be provided to businesses in the Budget next week, but executives fear that this temporary measure will not be permanent and that a permanent solution will be found.
It was when Sir Nigel Wilson (the boss of Legal & General), a blue-chip financial services firm, said that the UK was a “low growth, high productivity” economy. He also noted the limitations of high regulation and low wages.
Businesses can reduce their tax bill by up to 130 percent under the super-deduction, an emergency measure that was put in place after the Covid crisis.
Mr Hunt is looking at a proposal to reduce the 100pc. The Treasury is not happy with the PS11bn cost upfront and the possibility of it being misused. According to the Resolution Foundation think tank, this plan would eventually be paid for by increasing investment and productivity.
In recent days, Downing Street officials have been in contact with business leaders and representatives of some of Britain’s largest companies. Whitehall is asking experts to discuss the design and cost potential tax relief options as well as their possible investment impact.
The Treasury stressed that there is limited scope for tax breaks. Next week, the Office for Budget Responsibility (OBR), will publish its latest economic forecasts.
Sources suggest that Hunt might opt for temporary measures, or a roadmap to permanent capital allowances instead of an immediate replacement for super-deduction.
The warning came after a number of City luminaes warned that Britain would enter a period in terminal decline if Mr Hunt does not take immediate steps to encourage investment.
According to the Confederation of British Industry (CBI), the “double whammy”, a rise in corporation tax from 19pc – 25pc, and the end of super-deduction have already caused a chill in UK boardrooms.
CBI, British Chambers of Commerce, and Institute of Directors all warn of the dangers of failing to replace the super-deduction. This includes companies like BT, Siemens, and Virgin Media.
Sir Martin Gilbert, co-founder of Aberdeen Asset Management and chairman of Fintech company Revolut, stated that Mr Hunt needs to intervene strongly.
He stated that “we’ve got to really try and get the economic growth agenda back on track by encouraging investment. If we don’t, I believe the decline will continue.
“The tax burden is getting too high. There is no plan for growth. We’ll continue to fall behind other countries unless we have one.
Mr Wilson of Legal & General stated that he would like to see more investment in the UK but that regulation and policy have made it difficult over the past 20-30 years.
Sir Philip Hampton, who was formerly chairman of Glaxosmithkline, RBS and Glaxosmithkline, stated that he understood the need to have fiscal discipline from Mr Hunt, but cautioned that this should not be at the expense of growth.
He stated that it was impossible to continue trying to tax the wealthy with huge amounts of money. The country, as a whole, and its citizens, will be just as successful economically as their businesses. If you don’t make sure that businesses prosper, the entire population will suffer.
Rishi Sunak, is set to spend as much as PS800m on a new supercomputer amid concerns that Britain is losing ground in the race against China or the US for artificial Intelligence.
The Department for Science, Innovation and Technology (DSIT), a newly created department, has submitted funding plans to Mr Hunt to help fund investment in a powerful new computer.