Yes it does increase inflation. To use your example, that £300 given to the chair maker increases demand in various markets. Say he uses £200 of it to actually make the chairs then that's increases demand for the materials he uses to make the chairs, plus any other costs like electricity etc and he uses £100 to live on whilst he makes the chairs, so that's an increase in demand for food, water etc

But if there were spare capacity in supply of those things that may be purchased (ie in recessionary times where stimulus were needed) would it create inflation?

Yes. The price would be higher than it would have been. It doesn't mean it's a bad thing to do, the benefits in increased demand, higher employment etc might outweigh the negative of higher inflation.
In a recession (or recession-like conditions) it would make sense for the government to fill some of the demand gap by a combination of higher borrowing and temporarily printing money. (So long as the printing of money is controlled by a body other than the government. Ie the Bank of England)

But why would prices increase just because demand increased when there was spare capacity and maybe unsold stocks? It is possible to print money without inflation but the danger comes if the printing goes on too long. and that's something that can only be judged in hindsight.

Because if there's spare capacity and unsold stock then companies have to lower their prices to sell that stock, if they don't sell anything they'll go out of business pretty bloody quickly. Prices won't necessarily go up, but will either stay stable or not decrease by as much. So prices and inflation are higher than they would have been, which is an increase.
It is almost impossible to print (and effectively use) money without inflation, but there might be additional deflationary factors that are either stronger or even it out.

Precisely.

That still doesn't mean that the policy itself isn't inflationary.

No one would be doing it if it weren't for fear of deflation.

LeighGionaire: the only person I know who is less economically literate than George Osbourne.

Well you could argue that, indirectly, it was...

*hides under tinfoil hat*

Yeeees. Indirectly, is the word.

That's not what they're meaning.

I have heard, more than once, the: 'steel doesn't melt at ...' argument. They get laughed at. To their face. And not just by me.

rlCheck this outrl.

A school is found to have asbestos. Then the HSE changes its mind and says it's safe, even though other independent inspections say there is a problem. And the HSE won't release the report.

That would be one way to save money.