MP Birtwistle turns Osborne’s head on allowances
A PLAN by the government for a tenfold increase in tax relief on capital allowances to £250,000 followed intensive lobbying by Burnley MP Gordon Birtwistle.
Chancellor George Osborne thanked Mr Birtwistle and Pendle MP Andrew Stephenson “for their thoughts in this area” during his autumn statement.
Mr Birtwistle submitted a report on the benefits of higher capital allowances to the Chancellor and Prime Minister.
In it he argued that a higher tax relief would be cost neutral for the Treasury as it would lead to higher corporation and income tax from growing firms.
The Government baulked at his proposal for 100% relief on all capital expenditure for two years, instead opting for a cap at £250,000 which should cover all annual investment by most small and medium-sized enterprises (SMEs).
“I’ve hammered them enough,” said Mr Birtwistle, a Liberal Democrat MP. “I wrote the report and sent it through and I’ve lobbied hard for it.”
He said the change would prompt immediate investment at a company such as BCW Engineering in Burnley which makes turbochargers for diesel engines.
The Chancellor also made reference to support for the aerospace supply chain, a nod to the Aircelle site in Burnley which has won a £1.8m Regional Growth Fund bid to create a park for its suppliers. Mr Birtwistle is now pushing for a National Aerospace Supply Chain Centre at Salmesbury, near Preston.
He said: “Over the next 20 years the airlines are going to spend $7-8 trillion on new aeroplanes and the UK is the world’s second largest aerospace manufacturer. The present capacity is only half of what we need to meet demand. We need to double the workforce to 500,000 people and you can’t just do that over night.”
Martin Portnoy, Manchester tax partner at Ernst & Young, said: “Today’s announcement of a two-year increase in the annual investment allowance, from £25,000 to £250,000 per annum, represents the fourth change in five years.
“The last government introduced the allowance at £50,000, increasing it to £100,000 and it was cut by this government to £25,000 from April this year. Whilst such rapid changes could look incoherent, these incentives are clearly linked to the state of the economy and can accelerate investment. At a time of economic need, such yo-yo policy changes can nevertheless be rational.
“The Chancellor will be hoping that entrepreneurs are listening to this element of his message and start planning on a spending spree in the New Year, rather than focusing on austerity.”
