Britain Remade calls on Chancellor to drop factory tax to supercharge clean growth
Pro-growth campaign group Britain Remade is calling on Jeremy Hunt to go for growth in his first Budget by permanently dropping the factory tax, a move that could boost Britain’s economy by up to 2.5 percent and would significantly boost the construction of clean energy infrastructure.
The group wants to see the barriers which are blocking the building of more clean energy infrastructure removed in order to deliver economic growth, create jobs and increase prosperity, particularly in Britain’s former industrial heartlands.
Next month businesses are facing a cliff-edge with Corporation Tax rising to 25% and the 130% capital allowance super deduction on qualifying plant and machinery investments coming to an end.
At the same time, the UK’s growing renewables sector faces increasing international competition for investment. The $369 billion Inflation Reduction Act has already made companies across the globe reassess investment decisions in order to take advantage of the US subsidies, and the EU is planning to respond by cutting red-tape, change state aid rules and launching a “European sovereignty fund” potentially worth hundreds of billions of Euros.
Alongside its campaign on the planning regime, the group is urging the Chancellor to introduce a major expansion of capital allowances known as full expensing to help British industries retain a competitive edge.
Under this system businesses making new productivity-boosting investments in plants, equipment and machinery will be able to write those costs off in full up-front.
According to the Tax Foundation and the Centre for Policy Studies a ‘full fat’ version of full expensing that included structures as well as plant and machinery would boost investment by 4.2 percent, wages by 2.1 percent, and GDP by 2.5 percent in the long run.
A less ambitious version, applying only to plant and machinery, would boost the economy by 0.9 percent, increase wages by 0.7 percent and improve investment by 1.5 percent.
Across the globe nations are significantly increased the amount they are investing in clean and low carbon energy production, along with other clean technologies.
Leading renewable energy developer Orsted, which is developing the £8 billion Hornsea Three wind farm off the East coast, have warned that without changes to the tax system they may have to cancel this massive investment.
Hornsea 3 will be the largest offshore wind farm in the world, capable of generating enough energy to power 3.2m homes. Its will be the first customer for the £400m factory currently being built at the Teesside Freeport by SeAH Wind. The factory is creating 1,500 jobs in the supply chain and during construction, plus a further 750 direct operational roles.
But if the Chancellor does not take action when he delivers his Budget next Wednesday, Britain risks being left behind losing out on investment, growth and jobs across the North and Midlands.
The move to full expensing, along with others, will be contained in the group’s first policy paper. Powerbook will be released later this month and set out a roadmap on how Britain can be energy secure by 2030.
The policy recommendations will show how the full potential of clean energy can be unlocked in order to drive growth, create major job opportunities across the country, end Britain’s reliance on expensive imported gas and cut energy bills for households.
Commenting Sam Richards, founder and campaign director for Britain Remade, said:
“When the Jeremy Hunt stands at the Despatch Box next week to deliver his first Budget, he has a choice. He can either take a ‘steady as she goes’ approach and only focus on the bottom line; or he can look to the future, and alongside vital planning reforms, permanently drop the factory tax to boost investment, drive growth and create tens of thousands of jobs, may in Britain’s former industrial heartlands of the North and Midlands.
“Anything other than a permanent change would simply be a furlough scheme for Britain’s anaemic growth over the past 13 years when what we need is a vaccine.
“Britain may not have the same economic firepower as the US, China or the EU, but what we can do is make the country as open to investment as possible through a business friendly tax system and a common sense planning system. Without action major clean energy projects, like Hornsea Three risk being shelved putting growth and jobs at substantial risk.
“When Jeremy Hunt was appointed Chancellor his number one task was to stabilise the economy and restore confidence. On both fronts he has been successful, now he needs to take bold action to boost growth.”