A budget for business?
- 24 Mar
For the last few months I have been engaged in a simple, yet seemingly naive quest to get some clarity from each of the political parties on their policies for small business.
So far, I have had a hand-off from the Labour Party who, about a month ago, promised me a reply within 15 days; an apology from David Cameron who said that my first communication couldn’t be found and would I send it again so he could ignore it again; and nothing from the Lib Dems who you think would sell their own mother to get a cross in the box.
At least Alistair Darling has been forced to the dispatch box today to give me and every other business owner in the country, an account of what we can expect in the coming months should we entrust Labour with our vote.
The answer appears to be a series of modest, but well intentioned changes.
The Annual Investment Allowance, which gives us tax relief for capital expenditure, has been doubled to £100,000. Whilst the increase will provide a modest boost, it is only businesses that have the cash or the borrowing capability to invest above the current limit of £50,000 that will be able to benefit from it. Even if the allowance is fully utilised, it would only be worth £14,000 a year.
I, and I think most businesses, would prefer direct savings in tax and National Insurance over incentives to spend or borrow when business confidence is low and the availability of credit remains scarce. Liquidity is the key to our survival not debt and new machinery.
In this respect, the Chancellor shows that he is out of touch with the real needs of small business. He spurned the opportunity to reduce the headline rates of corporation tax and made no move to stall the 1% rise in employers’ NI, which is due to take effect from April next year: a clear sign that he believes taxing businesses on employing people is the best way to reduce the dole queues.
The promise of cuts in business rates for one year from October is more promising. There seems to be scant detail available on who will qualify and for what relief, but let us not look a gift horse in the mouth nor get our hopes too high.
The extension of the time to pay scheme is another welcome move. We haven’t needed to make use of this facility, but it is nonetheless reassuring to know that HMRC will play its part should we find ourselves in distress.
For the best news, it seems we have to wait until our ship finally comes in. Entrepreneurs’ relief has been doubled from £1m to £2m, providing an effective Capital Gains Tax rate of 10% on any gains that we make up to this level. Best get my finger out then and build some value.
The biggest factor though is not the impact of individual measures on individual businesses, but where the economy is going in general nationally and globally. Business is about confidence and when the confidence runs out the impact on small businesses is cataclysmic.
We are in the midst of our worse crisis for seven decades and our vote has to be cast on who with think is delivering the most sensible response. Do we believe that the impact of the recession has been minimised by the present government or caused by it? Do we think that we need to make the present government see through its actions or is it time for change?
Darling has been forced to err on the side of caution and avoid any radical changes for fear of it being branded electioneering. I, like many business people in the South East, see it as a missed opportunity to give a much clearer indication that the Labour Party is the party for business.
The question remains, who is?