Mixed response to the Budget
- 25 Mar
Mixed response to the Budget
The Chancellor delivered yet another Budget recently which, as usual, offered a mix of both good and bad news - depending largely on your viewpoint. We spoke to a selection of our clients to see what they thought of the Budget while Neil, as a small business owner, offered his views as well.
The Budget was an opportunity for The Chancellor to share some good news about the economy.
"The new growth rate forecast for this year - 2.7% - is terrific; that's the primary indicator that employment will continue to increase and wages rise," said Nicholas Hallam from Accordance. "I was very pleased to see the investment allowance doubled to £500K. We're bad at business investment in this country and this is a great opportunity to prioritise long-term commercial development."
John Berry from TimelessTime was less encouraged by news of economic growth.
"We're repeatedly told that while the economy is recovering, it's as a result of consumer spending," he explained. "This makes any recovery fragile. True economic strength comes from investment in skills. Currently both the US and Germany invest far more there than the UK and, on any prosperity or standard-of-living indices, UK still scores low - lower than all of the founding EU countries. So, looking at the big picture and desirable long-term strengthening, the Budget is a disappointment."
The Chancellor, though, claimed that it was a ‘Budget for business'.
Carol Lewis from Bainbridge Lewis said: "Big businesses will be happy with the increase in the Annual Investment Allowance (tax relief for investing in capital equipment) but surprisingly there is not much help for small businesses."
Neil agreed, claiming it was ‘a Budget that promised much but failed to deliver for the heartland of UK SMEs'.
He continued: "Once again, as a small business owner, it appears as if any benefits from the Budget have passed above and below us. In fact, there was very little in the Budget for a business with less than 10 employees which focuses on the UK as its key market."
Neil added: "As a business, we are unlikely to ever invest £250k in one year, let alone £500k, nor do we operate in an enterprise zone. What we really needed from the Budget was a zero rate threshold in Corporation Tax for small businesses. This is absolutely not about allowing business owners to line their pockets - but about leaving cash in the business for investment in people and growth."
Neil was, though, pleased to see, tucked away in the detail of the Budget, proposals to support the alternative finance market, to increase the range of options available for business owners.
Luke Aldridge from ROCC said he would still like to see more help for SMEs with banks forced to lend more freely with less punitive terms. "They still aren't behaving themselves," he added.
Luke continued: "I would also like to see more incentives for home working, which reduces congestion and pollution. Also more training incentives for graduates in leading technology areas, to prepare an innovative young workforce."
John Berry agreed that training and supporting the labour market is key.
"Governments and industry must resist the pressure of the pension funds and other business supporters seeking short-term returns," he explained. "Instead, they must focus on a long-term plan that goes way beyond the up-coming election. To improve our standard of living, Chancellors must focus budgets to boost labour force competence."
Away from businesses, Carol Lewis from Bainbridge Lewis pointed out that the Budget offered good news for pensioners, savers and basic rate tax payers with the increase in the personal allowance to £10,500 in 2015 and the annual ISA limit increasing to £15,000. And Paul Feist from Plus Accounting noted that, in addition, the annual Junior ISA limit is set to increase to £4,000 per child.
Carol added though: "Higher rate taxpayers had bad news in that the higher rate tax band is only increasing by 1% over the next two years which is below inflation."
The Budget did, however, offer some good news for pensioners. As Paul Feist explained: "At long last, there is some respite for the over 65s, with the announcement of a new Pensioner Bond which will pay annual, guaranteed rates of 2.8% for one year bonds and 4% for those willing to tie their money up for three years."
Nigel Ayres, Founder and CEO of World of Expats, explained that the Chancellor's words may be enough to encourage some pensioners to leave our shores for a new life abroad.
"The provisions to remove the requirement to purchase an annuity, which allows people to take their retirement funds in cash, will give the opportunity to invest this in assets," he said. "Some will choose to invest in property abroad as part of a plan to retire in lower cost locations abroad or as a second home to spend part of the year in a more attractive climate. This should continue to support this growing trend, especially following the weather people have endured over this winter."