Chancellor unveils his ‘budget for growth’ with productivity and innovation centre stage

Chancellor Jeremy Hunt today delivered what he called a ‘budget for growth’ with a series of measures aimed at improving productivity and innovation.

They included a range of incentives looking to encourage businesses to invest and grow and moves to get more people back into work.

He declared his budget would achieve growth by “removing obstacles that stop businesses investing; by tackling labour shortages that stop them recruiting; by breaking down barriers that stop people working; and by harnessing British ingenuity to make us a science and technology superpower.”

Mr Hunt went on to announce a policy of “full expensing” for businesses for the next three years and with an intention to make it permanent.

He told the Commons: “That means that every single pound a company invests in IT equipment, plant or machinery can be deducted in full and immediately from taxable profits. It is a corporation tax cut worth an average of £9 billion a year for every year it is in place.”

For smaller businesses, the Annual Investment Allowance is being increased to £1m, meaning 99 per cent of all businesses will be able deduct the full value of all their investment from that year’s taxable profits.

There will be additional tax support to help research and development intensive SMEs. For every £100 spent on R&D, eligible companies will be able to claim £27 back, helping them to invest in more R&D.

Mr Hunt also announced that fuel duty will be frozen and a 5p reduction will be maintained for a further year.

He also unveiled a raft of measures aimed at increasing the UK’s workforce. They include what he described as the “biggest change to our welfare system in a decade”, with reforms aimed at supporting more disabled people into work.

He announced plans to increase the pensions’ annual tax-free allowance from £40,000 to £60,000 along with abolishing the Lifetime Allowance – previously set at £1.07m.

Mr Hunt said that move would incentivise “our most experienced and productive workers to stay in work for longer”.

Focusing on the over-50s, he said he would increase the number of people who get “mid-life MOTs” from the Department for Work and Pensions, helping them assess their financial situation.

A new apprenticeship scheme, called “returnerships”, will be introduced for over-50s wanting to return to work in a new sector.

He went on to unveil reforms in childcare aimed at helping parents get back into work. These include an increase in funding for nurseries.

Mr Hunt also announced 30 hours of free weekly childcare is being extended to cover children below the age of three – as long as both parents are working at least 16 hours a week. It will eventually cover all children from the age of nine months.

The chancellor said: “We have one of the most expensive systems in the world. Almost half of non-working mothers said they would prefer to work if they could arrange suitable childcare.

“For many women, a career break becomes a career end. Our female participation rate is higher than average for OECD economies, but we trail top performers like Denmark and the Netherlands.

“If we matched Dutch levels of participation, there would be more than one million more women who want to work, in the labour force. And we can.”

The government will also fund schools and local authorities to increase supply of wraparound care so all parents of school-age children can drop their children off between 8am and 6pm.

Mr Hunt also announced 12 investment zones, which he said can be new ‘Canary Wharfs’. Areas chosen include Greater Manchester and Liverpool.

In other initiatives £400m will be available for new “levelling up partnerships” in areas including Blackburn.

The rate of price rises, or inflation, is forecast to fall to 2.9 per cent by the end of 2023, according to the Office for Budget Responsibility (OBR).

Mr Hunt told the Commons the government was on track to halve inflation, get debt falling and grow the economy.

He said the OBR is now forecasting there will be no technical recession, adding: “We are following the plan and the plan is working.”

The chancellor also confirmed that the energy price guarantee will remain at £2,500 until July.

The government will also add a total of £11bn to the defence budget over the next five years and it will be nearly 2.25 per cent of GDP by 2025.

To encourage investment, nuclear power will be classed as “environmentally sustainable”, subject to consultation. That move will give it access to the same investment incentives as renewable energy.

The chancellor will also allocate up to £20bn for the early development of carbon capture and storage.