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Corporate UK tax breaks to cost £20bn more than they generate, study finds (www.theguardian.com)

submitted 1 week ago by Emperor@feddit.uk to c/uk_politics@feddit.uk

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The tax relief on new plant and machinery announced by Jeremy Hunt as chancellor in 2023 was billed as a major part of the solution to the problem of Britain’s low economic productivity. Labour supported the measure at the time and have now promised to make it permanent.

An analysis by the thinktanks Demos and Common Wealth has found that the measure, known as full expensing, will cost nearly £30bn in lost tax revenue and spur a maximum of £10.5bn in fresh investment. The Treasury says the move will generate £15bn in investment, still only half what it has cost the taxpayer.

Andrew O’Brien, policy director at Demos, said: “Full expensing is not the silver bullet to boost business investment that some had hoped.”

...

Under the measures rolled out in 2023, companies can offset the full cost of any new IT equipment, plant and machinery against tax.

The move was designed to boost Britain’s low investment, which has been the weakest of any G7 country for several years as a proportion of economic output. Many economists blame this lack of investment by British companies for the country’s low productivity rates, which have never recovered since the 2008 financial crash.

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[–] thr0w4w4y2@sh.itjust.works 1 points 1 week ago (1 children)

the thing is, it’s a gap between the money the government is spending and the amount of money it gets through taxes and other incomes each year.

So it’s money that has to be borrowed from folks, every year to keep things going as they are. And each time that money is borrowed it needs interest paid on it which makes the problem worse. Especially with the high interest rates around the world.

So british people are working hard, paying their taxes and a percentage of those taxes is going towards servicing debt that has been built up, by poor spending decisions in the past.

It’s like payday loans for governments. you’ve either got to get spending under control, make more money somehow (tricks in the car park or maybe sell crack) or eventually reach the end of the road.

[–] Gradually_Adjusting@lemmy.world 1 points 1 week ago (1 children)

My experience, again, is American. I am used to governments spending into debt and looking strong doing it.

All I'm saying is that it's hard to understand, not that our way is better.

[–] thr0w4w4y2@sh.itjust.works 3 points 1 week ago

fair. US debt to GDP seems to be around 100-120%[1] whereas in the UK there was briefly a spike of debt to 100% of GDP[2].

As a much smaller nation whose currency isn’t used as a world trade mechanism, britain devalue its currency too much, so there are fewer economic levers to pull when managing debt.

[1] https://www.macrotrends.net/global-metrics/countries/USA/united-states/debt-to-gdp-ratio [2] https://www.msn.com/en-gb/money/other/uk-debt-hits-100-of-gdp-adding-to-rachel-reeves-headache/ar-AA1qSNYF