Brown's £1bn tax break for business

12 April 2012

GORDON Brown offered an olive branch to business by unveiling a mini-Budget of tax breaks for companies. The Chancellor abandoned Parliamentary tradition by announcing a series of key measures three weeks before his Commons Budget speech.

His decision to reveal the initiatives - which could be worth up to £1.1bn a year - is Labour's latest attempt to repair its battered relations with business. The proposals include tax credits for research and development, tax relief on intellectual property and tax exemptions on share sales.

The Government has faced fierce criticism from the City over its treatment of shareholders following the decision to pull the plug on Railtrack, as well as the growth in red tape and regulations. There has been mounting concern in Downing Street and the Treasury that the disquiet could discourage firms from backing public-private partnerships to rebuild hospitals, schools and the rail network.

Brown's announcement came just 24 hours after Transport Secretary Stephen Byers performed a humiliating climbdown over Railtrack in a bid to placate the City. Despite insisting he would never use taxpayers' money to bailout the shareholders, on Monday Byers unveiled a £300m grant to compensate them.

The U-turn has been given a guarded welcome in the City and business leaders welcomed Tuesday's follow up by Brown. But there was a sceptical response from Labour MPs. They voiced concern that the measures had been slipped out in a Parliamentary answer rather than debated in the Commons. Former minister Peter Kilfoyle said the measures should have been unveiled in an 'open and transparent way when backbenchers could actually question ministers about these things'.

Union leaders also warned that public services should not lose out. GMB boss John Edmonds said: 'Gordon Brown has assured us that spending increases for public services are guaranteed. If he can keep those guarantees and offer some tax breaks to business at the same time, that's fine.'

The Treasury defended the premature announcement, claiming Brown promised last year the measures would be introduced at the start of April.

However, the date of the Budget was pushed back almost a month, to 17 April, following the death of Brown's baby daughter. This meant the tax breaks for business had to be unveiled yesterday before the Commons broke for its Easter recess, said a Treasury official.

Officials confirmed the tax breaks on intellectual property and share sales would be worth £500m, but details on the research and development tax credit would be held back until the Budget. However, in a blunder last night, the Inland Revenue sent Press releases to several companies which revealed it will be worth as much as £600m - taking the total value of the three tax breaks to £1.1bn.

CBI deputy director-general John Cridland said: 'Firms will be delighted with this signal that Gordon Brown is pursuing his pro-enterprise course.' Shadow Chancellor Michael Howard accused Brown of hypocrisy by claiming to help business while imposing new tax rises on company car drivers.

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