Budget will go down well with industry

Business leaders expect blueprint for stability and enterprise

AGAINST a background of roaring stock markets despite EU-US trade war fears, business leaders told the Independent on Sunday last week they expected to applaud Gordon Brown's Budget on Tuesday as a blueprint for economic stability and enterprise.

"We're upbeat," said Kate Barker, chief economist for the Confederation of British Industry. "We're confident our messages have been heard."

The healthy state of public finances gives the Chancellor room to cut taxes or raise spending. But business leaders believe he will announce a fiscally neutral Budget.

"We expect the headline out of the Budget to be the introduction of a new 10p rate of tax," Ms Barker said. "But we don't expect the cost of the lower band to be paid for by business."

Instead, the CBI and individual businessmen are looking for a pause in the introduction of new business taxes. "A great many have been introduced over the past two years. We need time to digest them," Ms Barker said.

Small businesses will be looking for new measures consistent with the Government's aim of helping them to grow their operations to sufficient scale to compete in world markets. "We anticipate new tax allowances for R&D spending for small business," said Ruth Lea, head of the policy unit at the Institute of Directors. "We think the Chancellor may make his temporary 100 per cent allowance on first-year capital spending by small business permanent."

Ms Lea said she did not expect the small business measures "to change the shape of the world". But she and others agreed that Mr Brown's focus on boosting enterprise, with specific measures to support that theme, could help create a more risk-taking business culture in the medium term.

"Anything and everything the Budget does to help foster, promote, aid and create an enterprise economy is good," said Mark Dixon, chief executive of privately held Regus, the world's largest operator of business centres. "Over the next 10 years, the key to the economy's success will not be how many large corporations we have, but how many small, fast entrepreneurial businesses."

While saying they expected good news on Tuesday, business leaders expressed a few concerns. The CBI believes the economy needs to be stimulated but wants the stimulation to come not from the Treasury but the Bank of England, in the form of further interest-rate cuts.

Mr Dixon worried that anticipated tax breaks to encourage employee share ownership schemes would cover publicly owned, but not privately owned companies.

"Most successful start-ups begin as private companies," he said. "It's then they need share ownership schemes to attract good employees."

John Dyson, finance director of West Yorkshire-based Pace Micro Technology, a manufacturer of television receivers and decoders, worried that the buoyancy of the economy in the South-east was masking a genuine risk of recession in the rest of the country.

"We would like to see an increase in personal allowances greater than the rate of inflation," he said. "Up here in the north of England there are signs the economy is stalled."

Mr Dyson also worried that Mr Brown's Budget speech would sidestep the crucial issue of the relationship between the domestic economy and the EU economy as a whole.

"We operate as if it's a one-world market," he said. "We'd support greater harmonisation of taxes."