Grim signal to wealth creators from tax hike

Entrepreneurs predict that investors will be scared away from Britain by the Chancellor's failure to encourage them. Margareta Pagano reports

Where's the growth coming from to get us out of this mess? That's the real question everyone in the City wants answered, after one of the most anti-business Budgets in the history of Britain.

Here we ask a number of entrepreneurs and businessmen to say what they think about a Budget which every respected forecaster has accused of being wildly optimistic about the true state of the UK's finances.

One of the country's most successful entrepreneurs is Lord Bilimoria, the Indian tycoon who turned Cobra Beer into a multimillion-pound empire. He doesn't believe Alistair Darling's forecasts, and says there is no reason we should, especially as the Chancellor was so spectacularly wrong last year as well.

"This Budget revealed a deficit even bigger than any of us feared and puts Britain once more on the slippery slope to being the sick man of Europe. I'm not sure any of us believe Mr Darling's forecasts that we will see a return to growth by the end of the year. The situation could be far worse than the Treasury is predicting."

Every penny of tax on a pint imposed by the Budget squeezes Cobra, but it's the impact of the 50 per cent tax hike, and its long-term effect on the health of the country, that Lord Bilimoria fears most. "It's a bit like the non-doms situation. In some ways, it's not the tax itself but more the psychological message that the Government is giving to wealth creators.

"So much has been done to create an open, global economy, making the City one of the biggest financial centres of the world, and a magnet for talent around the world. But I'm afraid that Labour, through its stealth taxes and now the latest tax rate, is scaring people off again. It's the signal that it sends – that the UK wants to punish people who make money rather than encourage them."

As Lord Bilimoria points out, Treasury forecasts are out of line with everybody else's: Mr Darling reckons the economy will shrink by 3.5 per cent this year and predicts public borrowing of £175bn. But the International Monetary Fund predicts that the UK will contract by much more – by up to 4.1 per cent – while most forecasters argue that public debt could be as high as £230bn this year alone. Under the Treasury's forecast, the public debt/GDP ratio will rise from 36.5 per cent ( 2007-08) to 76 per cent in 2013-14, while Citigroup reckons it could be as high as 90 per cent.

Michael Spencer, another successful City entrepreneurs and chief executive of Icap, the world's biggest inter-dealer broker, says: "This was one of the most cynical Budgets ever. The 50p tax hike was a desperate, populist move ahead of the election to embarrass the Tories into defending the rich against the poor and to keep the public's attention off the enormous budget deficit. It was shameful in its cynicism."

But Mr Spencer, who is also treasurer of the Conservative Party, says the worst part of the Budget was the lack of incentives or encouragement for wealth creation. "The Government has raised public debt to record levels, but there was nothing in the Budget to encourage enterprise to create the wealth needed to help pay off this debt.

"I always thought Gordon Brown would go down in history as one of the worst ever prime ministers, but now I think he will be remembered as the worst ever."

At Longview Economics, Chris Watling is already predicting the next downturn. He thinks we are heading for another recession in about five years' time in order to pay for the cost of recovering from the one we are cur in now. "This Budget undermined any hope that the supply side can generate the wealth to get us out of the present predicament. There was no real help for entrepreneurs, apart from a few capital allowances, and the 50 per cent tax rate will put off wealth creators."

The view from the venture capital industry is equally grim. At Pi Capital, the chief executive, David Giampaolo, says he has received more than 40 calls and emails from private investors – part of his Pi network of business angels – asking him what they can do as a group to try to save this country from sliding further into the abyss. "This shows me the depth and breadth of the collective view that the leadership in the country has failed spectacularly. We are now long overdue for a change of government."

Simon Walker, the chief executive of the BVCA, the venture capital trade association, agrees that there was nothing in the Budget to encourage enterprise. He believes the decision to create a vague Strategic Investment Fund is a return to the public sector seeking to "pick winners" – but which will ultimately subsidise losers. Instead, it should have backed the highly targeted UK Innovation Fund for venture capital in which the private sector would have played a pivotal role. "This is, in short, not a Budget for recovery," says Mr Walker, "but a Budget that makes the burden for British business even heavier."

And, as any businessman knows, it's the three Fs who turn out to be the real backers of business – friends, family and fools.

Mr Darling did nothing to inspire any of them to part with their still over-taxed savings.

Start your day with The Independent, sign up for daily news emails
News
Jerry Seinfeld Comedians in Cars Getting Coffee
peopleSitcom star urges men to be more supportive of women than ever
Life and Style
Living for the moment: Julianne Moore playing Alzheimer’s sufferer Alice
health
News
Jay Z
businessJay-Z's bid for Spotify rival could be blocked
Sport
Louis van Gaal is watching a different Manchester United and Wenger can still spring a surprise
News
The spider makes its break for freedom
VIDEO
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
books
News
people
Sport
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle v United player ratings
Life and Style
love + sex
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot