Chancellor Alistair Darling detailed the UK’s last budget before the election yesterday afternoon, and in the aftermath, while the politicians busy themselves arguing over whether the middle classes will be better or worse off as a result, I am less concerned about child tax credits stamp duty than I am about what’s in it for small businesses and entrepreneurs. Usually, these are skipped over as successive governments focus their energies on keeping Middle England sweet, but this time something is different. I don’t know if it’s because I blog on business or because they really do care, but this year it’s almost as though some real thought has gone into providing help for smaller firms.
Not only has the annual investment allowance been doubled to £100,000 and the lower capital gains tax threshold raised to £2 million, but business rates have also been cut (though only for a year) so that over 300,000 small firms won’t have to pay a penny. Then there are the promises that the banks that were nationalised will be forced to give out credit, with the threat of being taken to an independent adjudicator if they fail to give a credible reason as to why they shouldn’t. There have also been encouraging noises made about a greater proportion of government contracts going to smaller firms, and a pledge that any invoices from those contracts will be paid within five days. Government bureaucracy or no, that would be impressive from any large debtor.
These are all welcome changes and if they have the effect of kick-starting more innovation and investment in the small business sector, that’s terrific. Growth has to come from all levels of the economy if recovery is to be sustained, otherwise the result will be a lopsided mess that could trigger another recession. And despite all the measures outlined that have been welcomed, some remain sceptical. The Federation of Small Businesses (FSB) is particularly disappointed that rises in the minimum wage and national insurance contributions are going to apply across the board, something they say could actually hinder job creation. Also, when you look at the additional £4 billion of credit that has been promised, it’s actually going to be spread quite thinly.
So is the government doing enough to help? There are already a bewildering number of initiatives and grant schemes around, but unless you know what you’re looking for and how to fill out the paperwork properly, it can seem like more trouble than it’s worth. Similarly, while some workers and firms will see their tax bills cut, those of us who are self-employed could actually end up paying more. True, we’ll be given more time to pay, but the threat of extra regulations concerning expenses and income shifting could have a significant and unwelcome effect on net earnings. Not only that, but as measures are put in place to put the onus on banks to lend responsibly, it’s pretty unlikely that any self-employed person will be able to get a mortgage without putting down a ridiculous deposit. Imagine it: you run a successful one-person business, but the pot-washer at your local pub stands a better chance of buying a home in the next year than you do.
As I said, it’s close to election time, and the Chancellor obviously wanted to give the small business sector a confidence boost. I can’t help feeling, however, that everything announced yesterday seems patchy and hurriedly assembled, like a meal you throw together when the cupboard is nearly bare and the shops are closed. While I’m definitely going to there’s anything that benefits me, I’m not going to get my hopes up that a brave new entrepreneur-friendly world has arrived just yet.
[Image by This is Oxfordshire]