Those of you familiar with GB will have noticed that we’re not averse to a good old whinge about the amount of PR spam we have to wade through on a daily basis. Budget day is a special case.
Special in that there's even more of it. Much, much more. I spent most of yesterday slogging my way through the good (depressingly little of it at that), the bad and the irrelevant.
I’ll spare you the details of the latter categories, but a special mention must go to Andrew Jupp, head of tax at Tenon, who made the absurd suggestion that Darling should have raised VAT to 20%.
“VAT is a tax on spending, not income – to some extent it's discretionary,” he said.
Way to stimulate the economy and get people spending, Andrew.
Anyhow, between clearing out emails from the accountants, lobby groups and blue chips, we did manage to speak to a few entrepreneurs to gauge their reaction to Budget 09. At best, the response was mixed (see Lovefilm’s Simon Calver) and at worst, scathing (Doug Richard on numerous occasions):
On the 50% top rate of tax for those earning more than £150,000:
Doug Richard, serial entrepreneur, investor and former Dragon: “The ceremonial impact of raising the top rate of income tax to 50% is purposefully only directed at a third of a million people. There are two issues that I have with it. Firstly, it will not create the amount of revenue which Darling hopes. He hasn’t taken into account that people will plan accordingly when the rate moves up and there are many variables involved. Avoiding tax is a legal exercise. A very famous US Supreme Court justice once said it is the obligation of every American to pay the minimum tax they owe and no more. It’s true. If somebody changes the marginal income rate it will change the entire matrix of the system. Receipts will never be a simple 5% off the top. Even if it were, the amount of money raised will barely cover the cost of their putative £750m investment bank.”
Matt McNeill – eTickets.to and Sign-up.to: “The biggest danger to businesses is the short-sighted raising of the top tier of income tax to 50%. What Labour doesn't seem to realise is that it's not just bankers and lawyers that this will affect - it's the successful entrepreneurs, the one's providing the jobs for millions of people by taking the risk of starting a business. Now they're being told that should they make a real success of things they'll have to give half of what they earn back. What an incentive. These are the people who are most able, and likely, to leave for more hospitable business climes - taking jobs with them. Can anyone say 'brain drain?' I think come April next year you'll see a lot of business talent at the departure gate of Heathrow. That'll really help our economic recovery.”
Oliver Bishop – Steak: “Increasing the top rate of income tax to 50% and scrapping personal allowances, is a big disincentive to management. It is proven that the higher the tax rate, the smaller the amount paid to the Exchequer. Why penalise the entrepreneurs who will find a way out of the recession?”
James Hibbert – Dress2kill: “This is just further punishment to potential entrepreneurs who will have toiled and worked under immense pressure only to be punished when they finally succeed. The government continue to do nothing to encourage enterprise in this country and now is surely the perfect time for them to be getting behind any would be entrepreneurs.”
Matthew Riley – Daisy Communications: “Many of those in this top bracket are entrepreneurs who will have risked their own capital and property to start new companies and create wealth in the UK. There is no aid or reimbursement for the risks that start-ups take and this change in tax will be a further deterrent for anyone entrepreneurial looking to enter business. In addition entrepreneurial leaders are now going to be under pressure to make up the wages for their senior executives who are earning above the £150,000 threshold. All in all, not a great day for business.”
Charlie Mullins – Pimlico Plumbers: “This is an appalling piece of logic, just when the government should be encouraging the people who have the ideas, drive and ability to pull us out of this dreadful recession they are trying to squeeze more tax out of them. They should be working with incentives not punishing top earners!”
On loss making firms being able to reclaim more taxes paid in the last three years until November 2010 and the main capital allowance rate being doubled to 40%:
Simon Calver – Lovefilm: “It is good to see the reality of the full recession is at last recognized but the budget is a mixed bag. Good news for struggling businesses but bad news for successful entrepreneurs. There are a number of good capital investment incentives and deferral of tax initiatives that will help the ease the pain in this tough time but if you can give dividends or take more reward you should plan carefully and quickly as tax rates are increasing significantly.”
Doug Richard: “The recessionary measures are fine, but nominal.”
On the £750m tech fund and £1bn for green industries:
Matt McNeill: “The investment fund for innovative tech and science firms is a good idea but too small to be really meaningful.”
Kresse Wesling – Fire-hose: “I am excited about the environmental budget but seriously worried about how it will be managed – this is a government that doesn’t keep receipts for its expenses! I think we need a body of senior environmental leaders to control planning, oversight, and have open book access to the accounts here.”
Doug Richard: “It’s hogwash. It is simply a continuation of a series of failed policies based on flawed philosophical principles, the key one being that they can choose which industries will be winners. No one has ever been able to do that, a government certainly cannot. It’s been shown that, especially in the last decade, that the wisdom of a very large crowd i.e. a market, is far more likely to choose winners than a specific policy setting body.”
On the current government and Labour’s stance on enterprise:
David Soskin – Cheapflights and Howzat Media: “In many ways, this budget is a complete irrelevance. It is highly unlikely that these people will be in power a year from now. Gordon Brown is squarely to blame for the depth of the crisis and the British people know it. Darling is clearly completely out of his depth. Any business employing a Finance Director with such a poor grip on the numbers as Mr Darling has displayed whilst he has been in office would have fired him months ago.”
Tom Savage – Bright Green: “I moved to San Francisco in February - a wise decision, it seems. Despite being many times larger than the UK's, the US government continues moved more nimbly, purposefully and confidentially in reaction to the financial crisis. There is a sense of optimism, despite the gloom. Obama has promised to transform the US economy by pumping money into energy, infrastructure and environmental issues. Here in the US, people believe that will happen. The UK government sounds like it is desperately clutching at straws, claiming that it will transform the economy into a high-tech, eco-economy? Does anyone believe that could happen? I'd love to, but I don't.”
Matthew Riley – Daisy Communications: “I think this year’s budget has totally discouraged enterprise. If entrepreneurs are vital to the recovery of our country’s economy, which the Chancellor has said publicly very recently, then now was the time he should have stood up and showed substantial encouragement and vital support. It would have been nice to see the Chancellor and his team take on more of an entrepreneurial approach. Mr Darling has spoken at length on how vital entrepreneurs are to helping the economic recovery and he should therefore be providing incentives for them to be more successful in the future.”
Mark Turrell – Imaginatik: “The 2009 Budget does not support entrepreneurs. We are supposed to be driving future economic growth but there is little support shown for entrepreneurial culture which is dependent to driving the UK out of the recession.”
Dan McGuire – Broadbean Technology: “Not only is Alistair Darling the least charismatic person in Britain, he’s also totally delusional. Justifying the staggering increase in debt with claims that the economy will grow by 3.5% in 2011 is truly pushing the boundaries of reality. Is there honestly a single person in the country who believes that is possible? And what of Gordon Brown’s sniggering while he and Darling were rightly savaged by Cameron? He should show some respect and spare a thought for all the people that have lost their jobs and businesses due to Labour’s total mismanagement of the economy."
Doug Richard: “We’re sending out a message out that we’re not interested in encouraging the creation of new businesses. We’re essentially putting a dampener on the likelihood of a recovery from the recession. [The budget was] all based on political motives, doing one on the Conservatives, not on what’s good for the country. The big flaw with Darling and Brown is that they no ethical basis for their actions and no competence on the execution. That’s a harsh judgement. But they shouldn’t have put the politics first and they will be remembered in history for having done so."