More support for business than expected

Mar 30 2010 by Sarah Green, The Journal

WITH the election just weeks away, the Chancellor delivered 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.

We are pleased that the Government will be borrowing £13bn less than expected in 2010/11. However, borrowing could have been reduced by £14.5bn had the Government not loosened fiscal policy by £1.4bn through additional spending and tax cuts.

Employer National Insurance contributions: The measure from the Government that would individually have helped most businesses would be to cancel next April’s proposed increase in employers’ National Insurance contributions.

Help for smaller businesses: The doubling in capital gains tax relief for entrepreneurs is a really positive move.

The extension of the ‘time to pay’ scheme for taxes owed gives some breathing space to businesses struggling with their finances during the downturn.

The Government’s decision to give the very smallest firms extra relief on business rates is a helpful step.

The extra places for science and technology students: Universities will need to look for bold ways of achieving efficiency savings by working together, given the need to restrain Government spending.

Measures to encourage a low-carbon economy: Given the scale of investment needed for a low-carbon economy, we’re pleased to see the Government thinking about how to attract private capital.

A green investment bank, reform of the electricity market and investment in ports’ capacity to attract off-shore wind manufacturers would be steps in the right direction.

But it is disappointing that the Government did not follow up with more support for household energy efficiency, and is pressing ahead and increasing the energy tax on manufacturing by £50m when it should be focusing on how manufacturers can be a part of a low-carbon economy.

We are pleased that proposed changes to the landfill tax have not gone ahead. This would have cost business £1bn over the next five years with no additional environmental benefit.

In conclusion there was more support for business than might have been expected, with a series of modest but helpful changes. The doubling of entrepreneurs’ CGT relief will help investment in small businesses and the extra money for science places at university will be welcomed by industry.

However, it is the big fiscal decisions over the next 12 months that will really determine the UK’s economic future.

Sarah Green, regional director, CBI North East