Jeremy Hunt called it the “largest business tax cut in modern British history”, a view that may not be shared by the hundreds of thousands of businesses in the service sector that don’t spend large sums on capital investment every year and are still adjusting to April’s general hike in corporation tax from 19% to 25%.
But so-called “full expensing” of spending on equipment, plant and machinery – or, rather, the making permanent of a tax-break that previously had a three-year life – can be welcomed by everybody else. A permanent regime looks the only one capable of improving the UK’s dire record on investment. And, since the push to net zero involves a multi-year upgrade on the nation’s energy infrastructure, getting rid of tax cliff-edges is a sensible piece of long-term policymaking. Labour, notably, backs the move.
How bad is the nation’s investment record? Since 1993 public and private investment has represented 18% of economic activity versus 21% for the rest of the G7, and the numbers have been substantially worse since 2016, noted the Panmure Gordon economist Simon French recently.
The standard argument against permanent full expensing is that it won’t accelerate investment, and may even slow it because companies no longer have a deadline to meet. And it’s true that Office for Budget Responsibility’s analysis predicted a short-term slowdown in investment. But that inevitable smoothing effect is hardly a killer objection.
Here’s one chief executive on how decisions are made at a company spending billions on heavy infrastructure: “Making full expensing permanent is not going to make me accelerate investment, but it definitely helps me to justify investment,” he says. “So, if the planning system is right, you will get more investment.” Quite: companies can be needy in their craving for certainty, but it does tend to help to get things built.
In fact, the other half of the long-termism programme – planning reform – looks the trickier job. Great Britain needs around four times as much new electricity transmission network to be built in the next seven years as has been since 1990, said Nick Winser, the new electricity commissioner, in his report to government in the summer.
In its formal response on Wednesday, ministers offered a sketch of what communities could be offered to “host” new pylons and sub-stations: “up to” £1,000 off their energy bills every year for 10 years, and a one-off £320,000 a mile for overhead lines, for instance.
Are those sums enough to silence opposition as new offshore windfarms are hooked up to the electricity grid? “Further work is needed to design the detail and implementation of the overall scheme,” said the document. You bet: full expensing of capital spending is easy to understand and simple to implement. Speeding up the planning system, and facing down local opposition to large schemes, requires political will.
What price, the NatWest share sell-off?
Roll up, then, for shares in NatWest. “It’s time to get Sid investing again,” said the chancellor, ignoring the fact that a reference to the privatisation of British Gas in the 1980s may be lost on younger viewers. Never mind: the state wants to get rid of another chunk of its remaining 39% stake in the bailed-out bank and a sale to the public is as good a means as any.
Here’s the big qualification, though: while many of us would agree that wider share ownership is a fine and neglected ambition, it would be disgraceful if these shares are flogged at a deep discount to their fair value.
The price for a NatWest share is set by willing buyers and sellers in a liquid market every weekday. Yes, a small discount for selling a slug of shares in a single transaction is inevitable – that happens even when tranches are sold in institutional-only offers. But the discount in those previous bank sales (not just NatWest, but also Lloyds Banking Group) has generally been about 3%-4%.
The chancellor should not countenance much beyond that mark just because he’s selling to private citizens. NatWest was nationalised on behalf of all of us, so there ought to be a strict obligation to achieve the highest possible price at disposal. Anything else would be a bung to the Sids who can find a couple of thousand quid at short notice. Keep the discount tight. Do not short-change the public purse.
