Member Article

Tax allowances can get the economy growing

By George Hardey, tax expert at Waltons Clark Whitehill, the Hartlepool-based firm of chartered accountants and business advisers. www.waltonscw.co.uk

The announcement this week that 200 new jobs are being created at Hereema Fabrication Group’s yard in Hartlepool, building platforms for the Cygnus gas project, was excellent news. Part of 4,000 jobs expected to be created across the country, Chancellor of the Exchequer George Osborne MP says the project was made possible by tax allowances for large shallow water gas fields.

“It is an example of the Government helping the private sector in the North East create sustainable jobs and lasting industry, replacing the public borrowing of the past,” Mr Osborne said.

There are some significant tax breaks available for the oil and gas sector, and likewise R&D projects benefit from such incentives.

However, the latter of these affects only a relatively small number of businesses and, while welcome, there needs to be more such schemes available. If, as the Chancellor has claimed, these incentives are creating jobs, then it needs to be looked at how this can be replicated across other sectors to boost growth.

Surely, with its central role in the economy, housing would be a prime industry for such support.

As well as the social and economic benefits to those who are housed, the sector has a huge supply chain which would also be boosted and the overwhelming majority of the labour and materials are domestically sourced. All of this is coffers into the Treasury, so the breaks would pay dividends.

And what about manufacturing? Yes, there are incentives for the UK to invent new products, encouraging entrepreneurship in the mold of Sir Richard Branson or Sir James Dyson. This is all well and good, and creativity should be supported, but what about making the more mundane things in life?

Each month, we spend billions of pounds more on imports than on exports, and it is far from the case that the UK is not capable of making those things we buy in from other countries. What’s more, if there were tax allowances or incentives to start up the manufacture of these goods, such as clothing, or white goods, we could not only cut the trade gap, but also take thousands out of unemployment and have them paid to do productive jobs which benefit the economy.

We do not have to be too clever about how these tax allowances are applied. If we keep it simple, more people are likely to take up the incentives and put them to the best possible uses – economic growth and employment.

A straightforward reduced rate of tax on a set percentage of profit in sectors such as these and others would have the potential to work wonders.

Well done to all involved in using the allowances available to create jobs at Hereema, but let’s see some more of the same in other sectors, for the good of the whole economy.

This was posted in Bdaily's Members' News section by George Hardey .