Published on 24 - March - 2010
The Budget 2010: business groups respondSupport for small businesses played a key part in the Chancellor's Budget announcement today, yet business groups remain anxious over how the deficit will be paid down and wary of political promises.
Speaking in the Commons today, Alistair Darling said he would "recognise the role Government can play in providing a launch-pad for businesses to succeed".
Plans include doubling investment allowance for small firms to £100,000 and also introducing a £2.5bn package for small businesses to boost skills and innovation.
The Chancellor also announced there would be no change to capital gains tax rates and that relief on capital gains tax would be doubled for entrepreneurs.
However, groups such as the British Retail Consortium (BRC) and the Forum of Private Business (FPB) who had called for the planned increase in National Insurance Contributions to be scrapped were left disappointed, as the 1% increase in employee, employer and self-employed rates was confirmed for April 2011.
BRC director general Stephen Robertson said: "If this really was a budget for jobs and growth the Chancellor would have scrapped next April's NI increase. Retailers' ability to maintain and create jobs will be undermined by this extra cost. The 1% increase in National Insurance will cost retailers an extra £220 million. This equates to almost 15,000 employees on an average retail wage."
However, a more positive announcement came regarding the HM Revenue and Customs' Time to Pay scheme, which has helped businesses spread £5bn worth of tax payments over a timetable they can afford, and will be extended for the whole of the next Parliament.
Mr Darling also said steps will be taken to speed up payments to businesses from government departments, with up to 80% of invoices being paid within five days. These measures were welcomed by the FPB who reported that the Time to Pay scheme and prompt payment by government bodies were the two most popular forms of Government support in a survey of their members last month.
Business rates were an issue causing concern for many retailers who are facing hefty charges this April. Mr Darling announced that business rates will be cut for one year from October, meaning a tax reduction for over half a million small businesses in England, 345,000 of which will pay no business rates at all.
This decision was met with a mixed reaction from business groups. "We welcome exempting businesses with a rateable value up to £6,000 a year from business rates for 12 months," said Mr Robertson. "This is useful assistance for the smallest shops, but it makes no difference to established retailers, the ones providing most of the UK's three million retail jobs. The Chancellor has offered them no new help with the big bills coming from increases deferred from last April, revaluation coming in this April and Business Rates Supplements... He should be making business rates more affordable for all retailers."
No mention was made of a workplace legislation review, which was a key expectation of the FPB.
Further key decisions concerned access to finance for small businesses. Mr Darling said: "It was understandable that banks reduced lending to repair their balance sheets but it caused problems for companies and the wider economy.
"In return for support during the financial crisis, we have made banks accept their obligation to lend more."
The Royal Bank of Scotland and Lloyds TSB will provide £94bn of new business loans, nearly half of which will go to small and medium-sized businesses, he said.
A new credit adjudicator service will be set up to examine lending decisions to check they are fair.
FPB ceo Phil Orford said: "While it's clear that the Government has been listening to our messages about small businesses in the recovery, there's a sense that this was a budget for an election and the Government is courting the small business vote... My initial reaction is that there was quite a bit of give, give, give in the Budget but nothing new - and nothing to address the serious issues this country faces."
Mr Darling claimed the economy contracted 6% during the recession and predicted growth of 1% to 1.25% in 2010, in line with forecasts. He also said no changes to vat or income tax were planned.
He also pledged that the Government would find savings by delivering public services more efficiently as part of an attempt to more than halve the UK's deficit over a four year period to 2014-15.
Reacting to the Budget speech, CBI director general Richard Lambert said: "With the election just weeks away, this was a clever, political budget. However, anxiety remains on how the deficit is going to be paid down, and the growth forecasts for 2011 and beyond are still on the optimistic side.
"There was more support for business than might have been expected, with a series of modest but helpful changes... However, it is the fiscal decisions over the next 12 months that will really determine the UK's economic future."
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