From our perspective this was a decent Budget for business. We’d set out our ‘wish list’ – see the blog post I wrote yesterday called ‘What budget should Osborne deliver on Wednesday’ – and George Osborne did a lot to meet our expectations on Corporation Tax. We very much welcome his proposal to accelerate the reduction in Corporation Tax to 26 per cent. There is more work to be done on, but this measure begins to kill the growing perception that the UK is a high tax country.
We’re also pleased that the Chancellor made a clear statement that the 50 per cent rate of income tax is a temporary measure. The 50 per cent rate will damage long term economic prospects and needs to be repealed as soon as possible. In terms of immediate relief the reduction in fuel duty was also good news. Businesses small and large that are experiencing a sharp increase in their cost base will be grateful that the duty was cut slightly. The scheduled 5p increase on a litre of petrol would have been very painful to many IoD members.
So overall this was a Budget aimed at changing perceptions and boosting business confidence about long-term economic prospects in the UK. The Chancellor didn’t have much money to play with but he played his hand well on the big issues.
It would be good to see better support to service based businesses.
The natural reaction of most businesses to a failed recruitment attempt is to contract. If businesses could get an NI rebate for staff that do not work out during their initial 3 month probation, it would reduce the risk when employing new staff. It would help everyone if the government shared some of the risk of employment, during the time they are asking us to retrain public sector workers. Additionally it would most benefit those who represent greater risk, such as graduates or the long-term unemployed.
Additionally, I would like to see the qualification of entrepreneurs’ relief extended to include staff via EIS.
As a member of the IoD it would be nice to see these suggestions put forward in the next budget submission.
What I didn’t hear was anything to encourage people to actually start a business.
We need more new small businesses and more new entrepreneurs, and they have to be encouraged, given incentives and helped. Starting up is the hardest part and even harder if you’re going into a new industry in which you have no experience. Depending on which day you watch the awful Dragons’ Den programme, this is either described as folly or highly admirable! But many people have done it and been highly successful.
Small business employs 50 – 60% of the workforce (depending on whose stats you read). If a small company takes on one new employee that can have a huge effect on that company, helping to grow and to, well, take on another person. When Megacorp Ltd employs 1 person, nothing changes.
But tiny startups need help. There is plenty of advice and guidance available, but there is no financial help. I’m not saying that everyone with an idea should be given £20k, just that there should be support. Many people thinking of starting up, wonder how they will manage financially before the business takes off, how will they afford all the things that they need for the business. Then they read those depressing stats again, and many imagine that THEY will be in the huge % that fails.
There are plenty of grants for the fashionable industries. The u25s, green co, tech, social enterprise. We even have schemes for school children. Now we have help for companies in Enterprise Zones in disadvantaged areas. But anyone outside these fashionable groups is shown the door.
And yet outside these groups there are still plenty of people who want to start a business. Many are sitting on redundancy money and many years of business experience.
With a list of things to support them, they might be enthused to start:
In the first year only:
Significantly lower personal/corporation tax
No VAT on supplies (for companies not registering for VAT)
Weekly support payments (instead of Job Seekers Allowance) for 3-6 months (depending on business type) whilst business is set up.
Business rate relief for those that can’t operate without premises.
Small loans – again dependent on the business type and business plan. To be paid back when the business is in profit. These could be as little as £2k. That can make a big difference to a start up. They are doing it for hundreds of thousands of students, why not business start ups?
My most radical idea, what I’d really like to see is the creation of a Business Bank. It can be funded (but not exclusively controlled) by the High Street banks, VCs and large plcs.
It would operate to make a profit but by helping businesses and making them successful, not by overcharging them and calling in loans early.
If a business chose to bank there, their loan application would be considered by people with business experience. The same for new startups applying for loans.
As with the new planning system, the default answer would be yes. So if a plan/idea were not really good enough, rather than having the door slammed shut in their face, the prospective customer would be advised on how to improve the plan. That can take, oh let’s see… 30 minutes.
When the money is handed over it would come with a business advisor/s whose job it would be to ensure that the company succeeded with the money. Then the bank is protecting their investment and it’s self funding, so loans can be cheaper.