James Caan evaluates the measures for entrepreneurs in yesterday’s Budget.

Alistair Darling attempted to display prudence with his revised down growth forecasts for next year, as he claimed that his Budget was based on the lowest end of Bank of England (BoE) growth estimates. Prudence is necessary in uncertain times, but these growth figures may still be slightly optimistic – the Tories certainly think so.

But the Budget outlined a clear set of priorities, even if there wasn’t a great deal of clarity over how they will be financed. On the whole, I welcome the focus on supporting business, particularly SMEs, outlined yesterday.

I think both businesses and the unemployed will welcome many of the policies announced, particularly those outlined in the £2.5bn one-off growth package aimed at helping small businesses.

The success of this package seems to be essential for the chancellor’s projections for growth, and I consider it to be theoretically well-balanced between helping businesses on the one hand, and helping people to re-skill and find jobs on the other. Even if these policies are overshadowed by the size of the deficit, increasing the training and skills base of British workers is an essential part of the recovery.

The Budget’s primary plan to get banks lending to business involves loan targets totaling £94bn between Lloyds and RBS. I welcome this policy focus, as the latest BoE figures reveal that lending to business actually weakened in January, as did investment.

The long term recovery depends on effectively tackling this credit problem and getting businesses reinvesting and hiring staff. The major difference between this year’s targets and the ones that were largely insufficient last year is the specific focus of lending £41bn to SMEs – those most unable to secure credit at realistic levels.

Confidence is crucial, and if businesses are going to plan for growth, invest, and hire more people, then they need to be secure in their belief that there is the right support for that.

Darling also outlined a legal service that can fast-track credit complaints from SMEs, and although the merits of overriding market evaluations of risk are uncertain, this certainly proves that the Treasury is serious about this issue.
The other side of the equation, and the necessary complement to policies designed to get credit flowing, are those that actually incentivise entrepreneurship and investment itself, such as:

  • The extension of the ‘time to pay’ policy that enables businesses to defer corporation tax payments – this policy will be much welcomed by business because one of the main issues for business confidence, and even survival, at the moment is poor cashflow.
  • The new national investment corporation – UK Finance for Growth – which will streamline and improve the government’s £4bn range of finance support for business. This will be welcomed by business and provide a good boost, especially to SMEs, adding again to their ability to secure finance at realistic levels, and their confidence to invest and employ more people.
  • The continuation and doubling of the investment allowance that encourages businesses to re-invest their profits and avoid tax whilst doing so will be a good boost to investment and overall confidence; and I think those in manufacturing will be particularly relieved to have this support continued.
  • Doubling the threshold for ‘Entrepreneurs’ Relief for capital gains tax from £1m to £2m should increase incentives for entrepreneurship.

Fuel duty will go up and this will hit business and the electorate, however in the current economic climate and with such a large public debt, we need to be prepared for some tough measures in places.

All in all the Budget set out good priorities, although there is still a need for more details of the inevitable cuts. But this is lacking from all the major parties, and is only likely to be outlined after the election.