Asked by: Liam Byrne (Labour - Birmingham Hodge Hill and Solihull North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment she has made of the potential impact of the planned £20.4 billion of research and development spending on (a) economic growth, (b) the national investment rate and (c) crowding in of private investment.
Answered by Darren Jones - Chief Secretary to the Treasury
At Autumn Budget 2024, the government protected R&D by allocating £20.4bn to support its missions, including the growth mission. Recent Department for Science, Innovation and Technology published research has found an average rate of return to public R&D of 40% after 6 years from when the investment is made [1]. The government’s investment will also boost business investment in R&D. Although estimates of the impact on private investment vary, on average £1 of public R&D investment leverages around £2 of private R&D investment in the long run [2]. The Office for Budget Responsibility is responsible for modelling the impact of government policy on the economy.
[1] Returns to Public Research and Development - GOV.UK
[2] Research and development: relationship between public and private funding - GOV.UK
Asked by: Liam Byrne (Labour - Birmingham Hodge Hill and Solihull North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate she has made of the amount of additional business investment due to the capital allowances measures in the corporate tax roadmap.
Answered by James Murray - Exchequer Secretary (HM Treasury)
As a government, we are determined to provide the stability needed by businesses to make investments that are critical to boosting growth in the UK.
That is why, in the Corporate Tax Roadmap, the Government has committed to maintaining the fundamental features of our world-leading capital allowances system, for the duration of this Parliament. This includes permanent full expensing system and the £1 million Annual Investment Allowance. As a result of permanent full expensing, the OBR expect business investment to increase by around £3 billion each year, and in the long run GDP will be 0.2% higher each year.
With a stable and predictable capital allowances system, businesses will be able to rebuild the confidence they need to make significant long-term investment decisions.
Asked by: Liam Byrne (Labour - Birmingham Hodge Hill and Solihull North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment her Department has made of the potential impact of capital spending on economic growth in the next (a) five and (b) ten years, specifying (i) the fiscal multipliers targeted and (ii) the private sector investment included.
Answered by Darren Jones - Chief Secretary to the Treasury
Economic growth is the number one mission of the government. Through the growth mission, the government will deliver a milestone of higher living standards in every part of the United Kingdom by the end of the Parliament.
Investment is a vital part of addressing the growth challenge. Autumn Budget began rebuilding Britain by increasing public investment and unlocking private investment. Public sector net investment will average 2.6% of GDP over the Parliament, with over £100 billion of additional capital investment over the next five years. This will strengthen the UK economy over the long term.
When making allocation decisions, the Treasury scrutinises individual capital spending proposals in line with the principles set out in the Green Book and Five Case Model, to ensure that they deliver value for money. It also considers these in line with the government’s wider priorities, such as growth, and their overall deliverability and affordability.
The independent Office for Budget Responsibility produces regular and comprehensive forecasts on the impact of current government policies, including judgements about fiscal multipliers.
The OBR confirms that the Budget will have a positive impact on GDP in the next parliament and into the longer term from additional public investment. If sustained, the OBR judges the higher public capital spending, and the higher private sector investment this incentivises, could increase potential output by 0.4% after 10 years, and 1.4% in the long run.
Asked by: Liam Byrne (Labour - Birmingham Hodge Hill and Solihull North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what (a) metrics and (b) fiscal multipliers she plans to use to take allocation decisions for capital spending to Departments in the next five years.
Answered by Darren Jones - Chief Secretary to the Treasury
Economic growth is the number one mission of the government. Through the growth mission, the government will deliver a milestone of higher living standards in every part of the United Kingdom by the end of the Parliament.
Investment is a vital part of addressing the growth challenge. Autumn Budget began rebuilding Britain by increasing public investment and unlocking private investment. Public sector net investment will average 2.6% of GDP over the Parliament, with over £100 billion of additional capital investment over the next five years. This will strengthen the UK economy over the long term.
When making allocation decisions, the Treasury scrutinises individual capital spending proposals in line with the principles set out in the Green Book and Five Case Model, to ensure that they deliver value for money. It also considers these in line with the government’s wider priorities, such as growth, and their overall deliverability and affordability.
The independent Office for Budget Responsibility produces regular and comprehensive forecasts on the impact of current government policies, including judgements about fiscal multipliers.
The OBR confirms that the Budget will have a positive impact on GDP in the next parliament and into the longer term from additional public investment. If sustained, the OBR judges the higher public capital spending, and the higher private sector investment this incentivises, could increase potential output by 0.4% after 10 years, and 1.4% in the long run.
Asked by: Liam Byrne (Labour - Birmingham Hodge Hill and Solihull North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment she has made of the potential impact of R&D tax reliefs on (a) business investment and (b) economic growth.
Answered by James Murray - Exchequer Secretary (HM Treasury)
The Government recognises the important role that research and development (R&D) plays in driving innovation and economic growth as well as the benefits it can bring for society.
Overall, R&D reliefs will support an estimated £56 billion of business R&D expenditure in 2029-30, a nearly 20 per cent increase from £47 billion in 2022-23.
The latest evaluations (“Evaluation of the research and development tax relief for small and medium-sized enterprises” and “Evaluation of the research and development expenditure credit”) were published in 2020 by HMRC and can be found on the gov.uk website. In the Corporate Tax Roadmap published at Autumn Budget, the government committed to periodically evaluating the R&D reliefs to ensure they are as effective as possible and underpinned by a credible, up to date evidence base.
Asked by: Liam Byrne (Labour - Birmingham Hodge Hill and Solihull North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what metrics she plans to use to assess the value for money of capital spending allocated over the next five years.
Answered by Darren Jones - Chief Secretary to the Treasury
Economic growth is the number one mission of the government. Through the growth mission, the government will deliver a milestone of higher living standards in every part of the United Kingdom by the end of the Parliament.
Investment is a vital part of addressing the growth challenge. Autumn Budget began rebuilding Britain by increasing public investment and unlocking private investment. Public sector net investment will average 2.6% of GDP over the Parliament, with over £100 billion of additional capital investment over the next five years. This will strengthen the UK economy over the long term.
When making allocation decisions, the Treasury scrutinises individual capital spending proposals in line with the principles set out in the Green Book and Five Case Model, to ensure that they deliver value for money. It also considers these in line with the government’s wider priorities, such as growth, and their overall deliverability and affordability.
The independent Office for Budget Responsibility produces regular and comprehensive forecasts on the impact of current government policies, including judgements about fiscal multipliers.
The OBR confirms that the Budget will have a positive impact on GDP in the next parliament and into the longer term from additional public investment. If sustained, the OBR judges the higher public capital spending, and the higher private sector investment this incentivises, could increase potential output by 0.4% after 10 years, and 1.4% in the long run.
Asked by: Liam Byrne (Labour - Birmingham Hodge Hill and Solihull North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what her target level of economic growth is from the overall level of capital spending in the next five years.
Answered by Darren Jones - Chief Secretary to the Treasury
Economic growth is the number one mission of the government. Through the growth mission, the government will deliver a milestone of higher living standards in every part of the United Kingdom by the end of the Parliament.
Investment is a vital part of addressing the growth challenge. Autumn Budget began rebuilding Britain by increasing public investment and unlocking private investment. Public sector net investment will average 2.6% of GDP over the Parliament, with over £100 billion of additional capital investment over the next five years. This will strengthen the UK economy over the long term.
When making allocation decisions, the Treasury scrutinises individual capital spending proposals in line with the principles set out in the Green Book and Five Case Model, to ensure that they deliver value for money. It also considers these in line with the government’s wider priorities, such as growth, and their overall deliverability and affordability.
The independent Office for Budget Responsibility produces regular and comprehensive forecasts on the impact of current government policies, including judgements about fiscal multipliers.
The OBR confirms that the Budget will have a positive impact on GDP in the next parliament and into the longer term from additional public investment. If sustained, the OBR judges the higher public capital spending, and the higher private sector investment this incentivises, could increase potential output by 0.4% after 10 years, and 1.4% in the long run.
Asked by: Liam Byrne (Labour - Birmingham Hodge Hill and Solihull North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment she has made of the (a) economic impact and (b) fiscal multipliers of the corporate tax reliefs implemented by her Department; and what steps she is taking to monitor that impact.
Answered by James Murray - Exchequer Secretary (HM Treasury)
The independent Office for Budget Responsibility (OBR) assesses the economic and fiscal outlook, including the impact of policy decisions made by the Government.
The OBR regularly publish reports which include explanations of their methodology. The 2024 Economic and Fiscal Outlook published alongside the Autumn Budget is published here: https://obr.uk/efo/economic-and-fiscal-outlook-october-2024/
In November 2023, the OBR published an article ‘Dynamic scoring of policy measures in OBR forecasts’ detailing how the fiscal multiplier framework is used to analyse the macroeconomic impacts of policy measures. Appropriate multipliers are applied to corporate tax reliefs and capital spending.
More recently, in August 2024, the OBR published a discussion paper ‘Public investment and potential output’ outlining further detail on how public investment, including capital spending, affects the macroeconomic forecast.
HMRC delivers proportionate and systematic monitoring and evaluation of tax reliefs to help provide evidence-based policy advice to Ministers.
Since 2020 HMRC have published 14 tax relief evaluations covering 19 different reliefs, and some of these evaluations cover economic impacts.
On 5th December HMRC published statistics covering the costs of non-structural and structural reliefs, this includes 46 costings that cover corporation tax reliefs.
Asked by: Liam Byrne (Labour - Birmingham Hodge Hill and Solihull North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment she has made of the fiscal multipliers for (a) corporate tax reliefs and (b) capital spending authorised by her Department.
Answered by James Murray - Exchequer Secretary (HM Treasury)
The independent Office for Budget Responsibility (OBR) assesses the economic and fiscal outlook, including the impact of policy decisions made by the Government.
The OBR regularly publish reports which include explanations of their methodology. The 2024 Economic and Fiscal Outlook published alongside the Autumn Budget is published here: https://obr.uk/efo/economic-and-fiscal-outlook-october-2024/
In November 2023, the OBR published an article ‘Dynamic scoring of policy measures in OBR forecasts’ detailing how the fiscal multiplier framework is used to analyse the macroeconomic impacts of policy measures. Appropriate multipliers are applied to corporate tax reliefs and capital spending.
More recently, in August 2024, the OBR published a discussion paper ‘Public investment and potential output’ outlining further detail on how public investment, including capital spending, affects the macroeconomic forecast.
HMRC delivers proportionate and systematic monitoring and evaluation of tax reliefs to help provide evidence-based policy advice to Ministers.
Since 2020 HMRC have published 14 tax relief evaluations covering 19 different reliefs, and some of these evaluations cover economic impacts.
On 5th December HMRC published statistics covering the costs of non-structural and structural reliefs, this includes 46 costings that cover corporation tax reliefs.
Asked by: Liam Byrne (Labour - Birmingham Hodge Hill and Solihull North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if she will make an assessment of which corporate tax reliefs have the largest positive impact on economic growth, ranked by scale of impact.
Answered by James Murray - Exchequer Secretary (HM Treasury)
The government has committed to maintaining a range of generous investment incentives, including full expensing, R&D reliefs, and the Audio Visual Expenditure Credit.
While the government does not maintain a ranking of economic impact, we seek to regularly monitor and assess economic impacts and the independent OBR also publishes their assessments.
For example, the OBR's paper on the economic effects of full expensing sets out that they expect to increase business investment by £14bn over next five years.
Since 2020 HMRC have published 14 tax relief evaluations covering 19 different reliefs, and some of these evaluations cover economic impacts.
On 5th December HMRC published statistics covering the costs of non-structural and structural reliefs, this includes 46 costings that cover corporation tax reliefs.