In his speech to parliament, Darling said that the skills of the UK’s workforce combined with low inflation and interest rates provide a strong platform for Britain to meet long-term sustainable growth.
‘It is why we are judged as one of the best locations to do business and attract inward investment,’ he said. ‘I am determined to build on these strengths by maintaining our leadership in the low-carbon sector, boosting investment in our national infrastructure and skills and supporting our world-class hi-tech industries.’
Darling said that the government would support at least £160m of public and private investment in low-carbon projects and that it would invest £90m in the European Investment Bank’s new 2020 fund, which will provide €6.5bn (£5.9bn) of finance for green infrastructure projects.
‘In addition, we will double our commitment and finance for carbon-capture and storage demonstration projects to make us world leaders in this vital area,’ he added.
Further low-carbon plans include an annual average, tax-free payment of £900 to householders with home wind turbine or solar panels that plug their excess power into the national grid.
Electric cars will be exempt from company car tax for five years and electric vans will benefit from a 100 per cent first-year capital allowance.
The electrification of part of the railways network also received a boost with the go-ahead to further plans for rail electrification between Liverpool, Manchester and Preston.
An increase in corporation tax for smaller companies is to be deferred, leaving the 2010 tax rate unchanged for 850,000 small businesses.
‘We are also working to secure a contribution from the major banks towards a £500m Growth Capital Fund, which will invest specifically in small business,’ said Darling. ‘In January, we launched the Enterprise Finance Guarantee, which has already offered government guarantees on bank loans to more than 6,000 businesses. I have decided to extend this scheme for a further 12 months, which will guarantee a further £500m of loans to small businesses.’
Intellectual-property (IP) protection looks to benefit from the introduction of a 10 per cent corporation tax on profits derived from patents in the UK.
The pre-budget report received mixed reactions from industry.
‘The pre-budget statement appeared something of a damp squib with few surprises and little in terms of real help for the UK’s key economic sectors,’ said Martin Wright, chief executive of the North West Aerospace Alliance.
‘The highlights for the industry are mainly indirect but include a £500m Capital Growth Fund for SMEs [small and medium-sized enterprises] to be established with support from the banks, the £500m government loan guarantee for SMEs extended and corporation tax rises deferred.’
Peter Young, group chair at the Aldersgate Group, said: ‘A much more urgent approach to financing green technologies is needed for the government to meet its low-carbon targets. The majority of this can be delivered by the private sector but only with significant government commitment.
‘The adoption of new financial mechanisms, such as green bonds and a green infrastructure bank, would accelerate the transition to a low-carbon economy and lead to the creation of the highly skilled and highly paid jobs that the chancellor is targeting,’ he added.
Further criticism came from Danny Stevens, policy director of the Environmental Industries Commission (EIC), who said: ‘The government has missed yet another opportunity to radically reform fiscal policy in support of a green economic recovery.
‘While the government’s commitment to an additional £400m investment in low-carbon growth is welcome, it is only a small step forward. Huge strides still need to be made before the government can confidently claim that it is putting the UK is at the forefront of a worldwide low-carbon economic recovery.’
However, the 10 per cent corporation tax rate on income from patents arising from UK research and development received a more positive reaction.
Nick Dusic, director of the Campaign for Science & Engineering, said: ‘Using tax incentives to encourage investment in R&D [research and development] in the UK makes economic sense and should help strengthen research and manufacturing in key sectors. It is disappointing that the reduced rate of income tax is only planned for patents registered after April 2013.’
‘While we await the firm details of the scheme, it is clear that companies that invest in IP protection for any innovation will enjoy significant tax benefits compared with those that do not,’ added Nick Wallin, partner and patent attorney at Withers & Rogers.
‘This lower rate of corporation tax will help to foster and protect innovation at a grassroots level and this is essential if the UK is to become a true knowledge economy,’ he said. ‘However, whether the measures go far enough to keep innovators in manufacturing industries happy is yet to be seen.’