Today's pre-Budget statement by UK Chancellor Gordon Brown is likely to focus on business-friendly measures to boost British industry at a time of economic pressure.
Key measures are likely to include new tax credits for research and development spending, a compensation package for airlines to cover losses stemming from 11 September, and an announcement of further consultation on a training tax credit.
The Government will provide around £50m to Britain's three transatlantic carriers, to pay for the direct losses suffered after the terrorist attacks on America when flights to the US were suspended for four days. The airline industry is also hoping for some concessions on Airport Departure Tax, which currently raises £1bn a year. The airlines want it either suspended for a period of time or hypothecated so that the proceeds are ploughed back into aviation to pay for increased security costs. The Treasury has traditionally disliked hypothecated taxes, so this is the less likely option.
The R & D package of tax breaks will probably be worth around £450m. The CBI had been pressing for the credit to be extended to all R & D expenditure, but the Chancellor is likely to have plumped for a compromise proposal which will favour additional R & D over existing expenditure.
City hopes of a cut or even abolition of stamp duty on share dealings however seem likely to be disappointed. Indeed, the Revenue recently said that it was redoubling its efforts to collect the tax, whose yield has fallen recently due to depressed levels of share trading. The rules governing libaility to the tax are highly complex, especially for intermediary firms in the City, and the Revenue suspects that they are being bent in a way that favours share dealers.
The London Stock Exchange argues that the duty on share dealings puts British business at a competitive disadvantage as against other share-trading centres wich don't impose such a tax; but with the public finances under pressure, the Treasury is unlikely to abandon a tax which raised £4.48bn in revenue last year.
Consultations on the training tax credit will form part of a cross-departmental review of policy options following a Downing Street study on workforce development carried out last year. The study, by Downing Street's performance and innovation unit, sets out measures to raise investment in skills, regarded by the government as crucial to closing the productivity gap with the rest of the world.
Financial incentives for small businesses are among the options considered in the report, which also proposes help for individuals, including a repackaged Individual Learning Accounts scheme to assist low-level skills attainment.
The consultation is expected to lead to concrete proposals for next year's spending round, but Ministers are wary of a recurrence of the problems with ILAs, which were suspended after allegations of fraud and evidence of high take-up among people who did not need them.
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