The Government’s well-trailed change to stamp duty rules will dominate the coverage of today’s Budget – but perhaps the most interesting aspect was the package of measures aimed at small business and entrepreneurs. These included a one-year cut to business rates, a doubling of the investment allowance, capital gains tax relief for entrepreneurs and more Government contracts for SMEs. Although since there was no reversal of the fuel duty or NI hikes (‘a tax on every job in the country’ cried David Cameron), small firms might be forgiven for feeling that the Government is giving with one hand and taking away with the other…
Perhaps more than any previous Budget we can remember, the Chancellor seemed to be making a deliberate attempt to woo the SME vote today. 500,000 businesses will apparently benefit from the one-year cut to business rates (from October), while the Annual Investment Allowance (which allows firms to offset investment against their tax bill) will double to £100,000. The threshold at which entrepreneurs stop paying capital gains tax at 10% has been increased from £1m to £2m. More Government contracts will be reserved for SMEs (an excuse to pay less, perhaps?). And there were various measures aimed at university tech spin-outs.
In fact, Darling was keen to big up the success of Government intervention – from the bank bail-out to Nissan’s decision to build the Leaf in Sunderland (solely because of Government money, he said, rather implausibly). It’s even going to play at venture capitalism with a new ‘green’ investment bank to funnel £2bn into wind farms and the like. More significantly, he also promised – again – to force the banks to lend more money: RBS and Lloyds will apparently dole out an extra £90bn+ this year. SMEs will get almost half of that – and they’ll also have a new credit adjudication service to fast-track their complaints if they’re refused loans. (Apparently this will have legal powers of redress, but we’ll believe that when we see it).
On the economy more broadly, the public finances look to be in a slightly healthier state than the Government expected last year – borrowing is now expected to total £167bn this financial year, not £178bn as initially thought. But that’s still a pretty horrendous number. And although the Government insists it can halve the deficit over the next Parliament, it seems to be relying on some fairly heroic growth assumptions. Is the UK really likely to grow at 3.5% next year? Because nobody outside the Treasury seems to think so.
More than anything though, this was a political budget. The headline measure was a two-year freeze in stamp duty for homes under £250,000, to be paid for by increasing the stamp duty on homes worth over £1m to 5% (i.e. at least 50k per sale - there goes that capital gains tax relief). This is actually a ripped-off Tory policy, although it’s being positioned as a ‘fairness’ measure (we lost count of how often that word was used today). And perhaps the biggest cheer of the day from the Labour benches came when Darling announced that the UK was about to sign a tax information exchange agreement with Belize, a move brazenly aimed to re-ignite the Ashcroft row. All very amusing – but surely we have more important things to be worrying about?
Oh, and we almost forgot: there’s a new tax on super-strength cider. Teenagers and West Country folk unite – you have nothing to lose but your scrumpy.
In today's bulletin:
Budget 2010: Government tries to woo small business vote
Editor's blog: Sooner or later, the spending must cease
Carolyn McCall swaps GMG frying pan for easyJet fire
No panic for Sainsbury's despite sales slowdown
MT Special: David MacLeod on employee engagement