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The growth Budget

You can read about the full extent of the giveaways in our Budget coverage here – unsurprisingly, given the extent to which it underpins the nation’s economic feel-good factor, keeping the property market ticking over remains a key pillar of the government’s economic plans, along with masses of financial support to help businesses and the self-employed keep the wolf from the door. Even a proposed 6 per cent increase in corporation tax for larger businesses, to 25 per cent, will not happen for several years, and has been offset by a ‘super-deduction’ tax that will allow companies to offset their tax against capital investment. As Chris Dillow observes, that essentially means the government will be paying companies to invest over the next two years.

That will at least reverse some of the damage done to business investment by the pandemic, and will allay the concerns of some economists that a focus on tax rises to cut the deficit could choke off a recovery before it even began. However, as Chris notes, the effect could be temporary, and does not mean capital will be allocated wisely. And while personal tax rates will not rise imminently, the freezing of many thresholds leaves many exposed to the threat of rising inflation – and with Tax Day on 23 March and an Autumn statement to come it may be too early to count one’s chickens when it comes to possible changes to capital gains tax and the lingering threat of wealth taxes. 

Nevertheless, a growth budget is encouraging, even if the ‘build back better’ theme behind it is becoming a rather clichéd political message. As I have written before, announcing industrial policy is far easier than delivering it, especially when every country is trying to pull off the same trick. Maybe the UK has an advantage, though: its stock market. It cannot be a coincidence that the findings of Lord Hill’s listing review were published so close to a Budget with growth at its core, changing the rules on share classes and the issuance of prospectuses to attract more high-tech listings, and paving the way for much greater retail participation in initial public offerings and capital-raisings. 

I have bemoaned the low-tech nature of London’s markets before, and can only view efforts to change that as a good thing. But we should also be wary of the risks that come with a loosening of listening requirements. Aim’s light-touch regulatory regime attracts much criticism and many bad companies (as well as some very good ones of course), and as Paul Jackson writes in this week’s No Free Lunch, the huge Spac craze has the hallmarks of an accident waiting to happen. Growth is good, but not at any price.