Chancellor Jeremy Hunt today underlined the importance of the green economy to Britain’s long-term competitiveness as he unveiled a package of tax cuts and supply-side reforms aimed at revitalizing the country’s flagging economy .
In his autumn statement to Parliament, Hunt promised that cuts to national insurance and the “largest business tax cuts in modern British history” would help boost business investment and trigger renewed economic growth, which stood at zero percent last quarter was standing.
However, Labor branded the measures as grossly inadequate, citing new forecasts that downgraded Britain’s growth prospects for the next three years. The Office for Budgetary Responsibility (OBR) confirmed that its estimate for Britain’s medium-term potential growth has fallen to 1.6 percent, down from the 1.8 percent forecast in March.
Hunt put business tax reforms, including a move to make the full tax credit permanent, front and center in a statement aimed at boosting investment and tackling the productivity gap between Britain and its economic competitors.
Hunt said the tax relief on capital expenditure means that for every £1 million a company invests, they will get a £250,000 discount on their tax bill in the same year, adding that leading business groups had described the policy as “the most transformative thing I could doing. for business investment and growth”.
The move is expected to cost the Treasury £11 billion a year, but Hunt stressed that increased fiscal space due to recent inflation and the freeze on tax thresholds means the changes are now affordable.
“It means we not only have the lowest corporate tax rate in the G7, but also the most generous capital allowances,” Hunt said.
Treasury Department documents highlight how this move could be particularly beneficial for capital-intensive clean energy and low-carbon infrastructure projects.
“Permanent full charges, including the 50 percent first-year fee for assets at special rates, will give companies certainty to plan long-term investments,” the report said. “This applies across the economy, including the UK’s capital-intensive green industries such as solar and offshore wind, which will also benefit from a new investment exemption from the Electricity Generator Levy. Permanent full cost reimbursement also provides further support for companies wanting to decarbonise. by investing in solar panels and heat pumps, and for companies that want to invest in newer, greener machines and installations.”
Writing on social media platformChris Stark, chief executive of the Climate Change Committee, described the full release of capital allowances as “a very welcome step” that should help accelerate the transition to net zero. “[It] would lower a tax barrier for all kinds of capital investments in business,” he said. “And of course, net zero is generally quite capital intensive.”
In addition, Hunt promised further boost for clean energy developers through the government’s response to today’s Winser Review on how to accelerate electricity grid development and new proposals to speed up planning decisions.
The Chancellor confirmed that the Government would back a series of reforms aimed at reducing delays in accessing the electricity grid for new energy projects by 90 per cent, including proposals to offer households up to £1,000 a year off their energy bills if they connect with it. agree to organize new infrastructure projects. He predicted that these measures would generate around £90 billion in additional business investment over the next decade.
He also unveiled plans to allow local authorities to make companies pay the full cost of processing planning applications, provided they meet stricter deadlines to reach a decision. “Many companies say they would be willing to pay more if they knew their application would be approved more quickly,” Hunt said.
And there was more welcome news for renewable energy developers after the Treasury Department proposed changes to the windfall tax on clean energy producers to exempt new projects. “This is likely to be a new boost for the sector which has repeatedly called for investment security in a market where supply chain inflation, ironically driven in part by the gas crisis, remains stubbornly high,” said Jess Ralston of the Energy and Climate Intelligence Unit think tank .
The reforms were accompanied by new plans to boost the UK’s skills base through new funding for technical apprenticeships and confirmation of the £4.5 billion in funding for modern manufacturing industries that the Treasury left behind last week.
“For our advanced manufacturing and green energy sectors, international investors say the biggest thing we can do is announce a longer-term strategy for their industries,” Hunt said. “So, together with the Secretaries of State for Business and Trade, Energy Security and Net Zero, I am publishing these plans today. I confirm that we will provide £4.5 billion in support over the five years to 2030 to attract investment in strategic manufacturing sectors.”
The package includes £2 billion for zero-emission investments in the automotive sector, £975 million for the aerospace industry and £520 million for life sciences companies. In addition, £960 million will be provided through a new Green Industries Growth Accelerator, focusing on offshore wind, electricity grids, nuclear energy, carbon capture use and storage, and hydrogen.
“These targeted investments will ensure Britain remains competitive in sectors where we are already leading, and innovative in sectors where we are not,” Hunt said. “And taken together across our fastest growing innovation sectors, this support will deliver an estimated £2 billion of additional investment per year over the next decade.”
The new funding is likely to be welcomed by business groups, but questions will also be raised about whether £960m of government support for green industries will attract enough investment given the fierce competition caused by the US Inflation Reduction Act.
Rebecca Newsom, head of politics at Greenpeace UK, accused the government of “tinkering around the edges” when what was needed was “courageous leadership and a big vision for a green industrial strategy”.
“These small reforms will do nothing to address the scale of the problems facing our economy and climate,” she said. “The US, EU and China are already light years ahead of us in supporting green technology investments, and investors are ‘shocked’ by our government’s recent turn to net zero. This statement has not changed that.”
Green business groups had mixed reactions to the package, welcoming the new tax breaks and grid connection reforms while urging the Chancellor to do more to attract green investment.
“This autumn statement takes some positive steps forward, but higher ambition and policy stability are vital if the government is to get the economy back on track in the coming year,” said Rachel Solomon Williams, executive director of Aldersgate Group. Long-term decisions require a commitment to implement them now, supporting the development of low-carbon industries that will drive future growth.
“We welcome the announcement that full capital disbursement will be made permanent as it can stimulate business investment in decarbonisation – but it is not enough on its own. This urgent need for action is demonstrated in clean energy investment, which Britain has been falling away from. fourth to seventh in terms of attractiveness to investors, partly due to global competition from the US and EU, but also due to a lack of consistent government policy support. A comprehensive response to the US Inflation Reduction Act remains vital, as part of a clear industrial strategy that gives the UK economy a clear direction that businesses can rely on.”
Beverley Cornaby, program director of the UK Corporate Leaders Group, labeled the Autumn Statement as “another missed opportunity by this government to set the tone and send the signals that the private sector is crying out for”.
“The Chancellor has taken a number of positive steps, including fully releasing capital grants that will boost much-needed private sector investment,” she said. “While tax cuts will be welcomed by businesses, as will specific measures to support the expansion of the electricity grid and investment in manufacturing, including electric cars, they will not deliver the levels of green economic growth we urgently need now. What is missing is the signal of intent that will drive a shift in private sector investment and a commitment from government leaders to tackle some of the tougher aspects of decarbonisation… The UK government still needs to quickly provide leadership take on in these areas. “
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