Chancellor Alistair Darling gets a mixed reaction to his third - and he hopes not final - Budget.
In a reiteration of the key points of differentiation between Labour and Conservative policy just weeks before an election, the Chancellor spoke of the necessity to avoid “short sighted” spending cuts.
Nevertheless, public debt this year is actually going to be £15bn less that Mr Darling predicted in his pre budget report in December. The deficit this year will be £163bn rather than £178bn.
Business related measures included:
• £94bn worth of extra lending for small and medium sized business, to be disseminated through the part state owned banks Lloyds and Royal Bank of Scotland. £45bn to be reserved for small and mid sized businesses
• 100% capital allowances applied to the first £100,000 cost of capital, doubled from £50,000. 20% rate retained for the balance.
• Business rates are to be cut from October and the new rates will mean no payments at all for 345,000 businesses
• An extra 15 per cent of central government contracts will be reserved for SMEs
• £35m university enterprise capital fund to promote innovation
• £270m to fund 20,000 science, engineering and maths degrees
• £2bn for ‘green investment bank’
• £60m for offshore wind industry
There was no update on National Insurance despite a host of trade organisations including EEF, the Confederation of British Industry and the Federation of Small Business petitioning the Chancellor in recent weeks to scrap an increase of 1 per cent in employer contributions which is planned for next year.
Reaction to the Budget has been mixed.
Andy Brook, a director at accountancy firm Deloitte welcomed the capital allowances increase. He said: “Small and mid-size manufacturers will be pleased to note the increase in the annual investment allowance to £100,000 per annum. The benefit of this relief is allowing tax payers to claim a 100 per cent tax deduction for investment in plant and machinery up to £100,000. For expenditure above this the rate of capital allowances was maintained at 20 per cent.”
Jeeger Kakkad of the EEF was more sanguine, however. “Some businesses will benefit but any incentives to invest will be off-set in the short-term by uncertainty about what tax and spending decisions may be around the corner,” he said. “However, frequent changes to the taxes such as those to investment incentives compound the view that the tax system lacks direction and predictability.”
Click here for more industry reaction from accountants BDO, the Food and Drink Federation, the Society of Motor Manufacturers and Traders, the ADS and more…