Brown to bail out airlines and boost factories

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Gordon Brown is today expected to provide a boost to manufacturing companies and the airline industry by announcing new tax credits for research and development spending and a compensation package to cover losses stemming from 11 September.

The Chancellor is likely to use his Pre-Budget Report to confirm that the Government will provide around £50m to Britain's three transatlantic carriers, to pay for the direct losses suffered after the terrorist attacks on America when flights to the US were suspended for four days.

The lion's share of the compensation – some £30m to £40m – will go to British Airways, while Virgin Atlantic and bmi British Midland will receive smaller amounts.

Mr Brown is also expected to unveil a new package of tax breaks worth around £450m to encourage greater R&D investment by manufacturing industry.

The employers' organisation the CBI had been pressing for a package worth up to £1bn by extending tax credits to all R&D undertaken by all companies. But in the face of Treasury opposition it has submitted a compromise proposal which would cost about half that amount and is said to have been favourably received by Mr Brown. The Chancellor is likely to make business friendly measures a centrepiece of today's Commons statement.

The airline industry is also hoping for some concessions on Airport Departure Tax, which currently raises £1bn a year. The airlines want it either suspended for a period of time or hypothecated so that the proceeds are ploughed back into aviation to pay for increased security costs.