Britain’s autumn statement got business taxes right

YouDO NOT GDPGDP have to be an economic historian to know that politicians like to cut taxes before elections. On November 22nd Jeremy Hunt, Britain’s chancellor of the exchequer, announced tax cuts worth £18bn (0.7% of ), 14 months at most before Britain goes to the polls. Mr Hunt said he was able to loosen the purse strings because of his sound economic stewardship. One of his measures was indeed a striking example of sensible policymaking. Unfortunately, the rest of the budget for the next government, which surveys suggest is very likely to be formed by the Labour Party.Start with what he got right. Mr Hunt said that he would make permanent “full expensing”—the right of businesses to deduct upfront their capital expenditures from their taxable profits. This nerdy-sounding change was probably the single biggest pro-growth tax reform he could have unveiled that was also politically feasible. Expensing undoes much of the investment-crushing effect of corporate taxes. The Treasury hopes that the Autumn Statement will eventually boost annual business investment by almost 1% of today’s —which would be a welcome fillip in an economy that has been starved of capital expenditure. Estonia and Latvia have permanent full expensing, but among big rich economies Britain will stand out for the friendliness of its tax code.