Infrastructure projects and taxation

As the government looks to give momentum to the UK’s stalling economic recovery, there is a widely held view that investment into infrastructure can stimulate growth and help rebalance the economy. There is one tool available to government which surprisingly it seems reluctant to use – this is taxation. It is suggested that the UK should introduce allowances for capital expenditure in infrastructure projects. These allowances could be called Infrastructure Investment Allowances (IIAs). Given that IIAs would be targeted to a specific asset class, there would be potential state aid issues to overcome, but this change should be possible and would give a strong statement that the UK wants to incentivise capital investment in its national infrastructure to stimulate sustainable growth.