Positive measures – but is it all too late?
BUSINESSES will benefit from some eye-catching measures in the Budget including a cut in corporation tax and a new employment allowance making it cheaper to hire staff.
But the big question is whether the Chancellor has pulled out the stops enough to boost business performance in the face of dire markets at home and abroad, with firms claiming he has done too little, too late.
For all Osborne’s efforts on the ‘supply side’, with policies aimed at boosting growth, exporters are faced with a fresh eurozone crisis triggered by the Cypriot bailout fiasco and the UK’s share of world export markets has plunged dramatically ( see chart).
This worsened an already bleak domestic situation, forcing the Chancellor to slash his growth forecast by half to 0.6pc.
Firms were disappointed not to have received relief on business rates, and said difficulties obtaining bank funding are still a huge drag on growth.
‘Business rates have risen so much in just a few years they are the number one enemy to many small firms,’ said Rob Downes of the Forum of Private Business.
The centrepiece of Osborne’s business package is a new employment allowance of £2,000 that cuts firms’ National Insurance bills, aimed at encouraging them to take on staff – though employment has held up surprisingly well in the slump.
In a jibe at his political opponents, the Chancellor boasted it is a ‘tax off jobs’.
The allowance, which will benefit up to 1.25m companies, with 90pc going to small firms, will be intro- duced next year. It will take 450,000 firms out of the employers’ NI net and reduce by 80pc the average NI bill for a company with fewer than ten employees.
Mark Beatson, chief economist at the Chartered Institute of Personnel and Development, said it would act as a ‘marginal’ incentive for small firms to create new jobs.
The other flagship measure is a further reduction in the corporation tax rate to 20pc from 2015, as predicted here this week, giving the UK the lowest rate in the G20.
Another popular move is the boost to research and development tax credits announced in the Autumn Statement from 9.1pc to 10pc.
Diarmuid MacDougall of accountant PwC, said: ‘This is fantastic news for British business, especially those in high end technology sectors such as automotive, life sciences and aerospace.’ The Chancellor also extended a capital gains tax break for investors in his Seed Enterprise Investment Scheme, launched at the last Budget, and brought in a tax relief for investors in social enterprises.
A strategy for the new Business bank is being published setting out an accelerated timetable on how it will use £1bn of new capital to support small firms.
The measures come on top of £1.6bn of funding announced earlier this week to support high growth sectors such as aerospace, automotive and life sciences.
The Government also announced it is adopting most measures in Lord Heseltine’s report No Stone Unturned, on pump- priming growth in the regions.
But a report by the Institute for Public Policy Research found overseas investment in the north had plunged, following the move by the Coalition to scrap Regional Development Agencies.
Tara Kneafsey, a small firms expert at global insurer RSA, said: ‘Osborne’s claim that this is a Budget for an “aspiration nation”, such as those who want to start their own business, is undermined by fragmented access to support services, particularly outside London and the South East.’
John Longworth, director general of the British Chambers of Commerce, said there were measures to commend in the Budget, but Osborne had not done enough.
‘We are at an unprecedented moment in our economic history and the Government should be doing everything in its power to get the economy moving.
‘Many of the Chancellor’s measures are positive but may come too late, particularly for smaller and medium-sized companies.’