Industry: Business rate cuts and extra lending cheers small business
Thursday 25 March 2010
Small businesses were among the chief beneficiaries of yesterday's pre-election Budget, as the Chancellor introduced measures designed to promote industrial growth.
Business leaders described Alistair Darling's statement as a "doughty performance," pointing to several policies, such as extending the so-called "time to pay" scheme, which allows distressed to delay corporation tax payments, as positive steps.
Small businesses will also benefit from the one-off cut in business rates, which will fall from 48.5p in the pound, to 41.4p for 12 months from October. Those companies that have previously paid rates of up to £6,000 will pay no business rates for a year from October.
Aside from tax benefits, the Government yesterday renewed calls for the taxpayer-backed banks, RBS and Lloyds, to increase lending to small businesses. Mr Darling said the banks would be required to lend £94bn over the next 12 months, with at least £50bn of that going to small firms.
David Bywater, a SME tax partner at the accountancy group KPMG, welcomed the extra lending: "This measure will make it easier for firms to get credit. If you're a business that has tried to borrow from these banks over the past year, it's been very difficult."
The call for increased lending will be backed by a newly created credit adjudicator, who will consider whether the banks have unfairly rejected loan requests. The adjudicator will have the power to overturn lenders' decisions.
RBS responded to the new measures by claiming that its ability to lend would be determined by the pace of economic recovery. "We have the capital to make this lending available to support our customers," said Sir Philip Hampton, the bank's chairman.
"The right amount of debt for business will be greatly influenced by the pace of economic recovery. We are committed to ensuring our credit worthy personal and business customers can access the funding they require." Sources close to the bank described the lending targets as "ambitious".
Other promises of help were more vague. The Chancellor began his speech with a promised £2.5bn package to help small businesses boost skills and innovation, which he said would be paid for out of proceeds of the bank bonus tax. Mr Darling also said that more public sector contracts would be awarded to small companies.
There were also criticisms of the Budget. The Federation of Small Businesses attacked the Chancellor for going ahead with the previously announced increases in employers' national insurance contributions, which some had hoped would be scrapped.
The Institute of Chartered Accountants in England and Wales (ICAEW) added that many of the policies announced yesterday lacked clarity: "Whilst the focus on jobs and investment is important in the short term, businesses will want to know more about what they can expect in the medium to long term," said Michael Izza, ICAEW's chief executive. "They need greater clarity on how departmental spending is going to be cut and also if taxes are going to be raised. This will have a direct influence on their plans to invest and grow."
Mr Bywater at KPMG said that Mr Darling scored "six or seven" out of 10 but warned that it may take some time before the proposals to come into force: "SMEs should welcome lots of these measures, specifically those that improve cashflow. However, there is certainly a concern over timing: this extra cash must get into the hands of SMEs as quickly as possible."
View from the marginals: 'We need all the help we can get'
Mumina Hassan, 22, Student
Constituency: Northampton South
Conservative majority in 2005: 4,419
A personal favourite from this year's Budget is the 10 per cent rise on cider duty. I think it's a great initiative as it will make alcohol less affordable for young people and will hopefully reduce their drinking.
I think scrapping the stamp duty on homes under £250,000 is good. It's encouraging more first-time buyers to go out on to the market. It would encourage me to buy if I could afford to.
However, the 5 per cent stamp duty on properties over £1m is not great for the people who buy those properties. To make the economy stable, you need to encourage people to buy properties, and this policy is at the expense of the rich. People at the top of the ladder will suffer the most. In the short term it's a good thing, but in the long term, when the economy is more stable, it's not such a good idea.
The pledge to support those under 24 is a great idea. More and more graduates face unemployment. So many people are applying for the same job, that graduates and young people need all the help they can get.
I don't believe the future forecasts for borrowing that Alistair Darling put up are realistic or achievable. I don't think they will be able to cut the borrowing by half by 2015.
I was too young to vote in the last election. I would vote for the Conservatives in the next election as I like the actions that they are proposing to take. I believe they are trying to fix the economy in the right way. They're reducing reliance on the welfare state, and trying to make everyone equal.
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