Tax breaks for UK firms are not worth the cost, analysis finds

Corporate tax breaks designed to encourage companies to buy new machinery and equipment will cost the taxpayer about three times as much as they generate, according to analysis of official forecasts.

- Kiran Stacey

The tax relief on new plant and machinery announced by Jeremy Hunt as chancellor in 2023 was billed as a key part of the solution to the problem of Britain's low economic productivity.

Labour supported the measure at the time and has 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 of what it has cost the taxpayer.

Andrew O'Brien, the policy director of Demos, said: "Full expensing is not the silver bullet to boost business investment that some had hoped."