A ‘budget for growth’ but little cheer for SMEs

Standing at the despatch box chancellor Jeremy Hunt delivered what he called a ‘budget for growth’ which he declared was aimed at improving productivity and driving innovation across the UK.

However, his big speech left many commentators feeling that more business support could and should have been delivered, especially for the nation’s SMEs.

The Federation of Small Business (FSB) was among those highlighting a lack of support for smaller firms during these challenging times.

While the budget looked to help households with energy bills, there was no announcement of further support for small businesses.

And the increase in corporation tax from 19 per cent to 25 per cent for companies with profits of more than £250,000 will go ahead from April 1.

Critics also pointed out there was nothing on tax reform to help inflation hit small firms struggling to stay under VAT thresholds.

The FSB’s national chair Martin McTague said the budget would leave many feeling “short-changed”. He added: “The distinct lack of new support in core areas proves that small firms are overlooked and undervalued.”

And he added: “Small businesses need more ambition and more focus. Action is what counts if we are to reverse the 500,000 small businesses lost over the last two years. It’s high time the government put small firms at the top of the agenda.”

The chancellor’s speech did include a range of incentives looking to encourage businesses to invest and grow and moves to get more people back into work.

However, the FSB said Mr Hunt had failed to take any action to make it easier for small firms to recruit people locked out of the labour market.

The chancellor declared his budget would achieve growth by “removing obstacles that stop businesses investing; by tackling labour shortages that stop them recruiting; by breaking down barriers that stop people working; and by harnessing British ingenuity to make us a science and technology superpower.”

Mr Hunt went on to announce a policy of “full expensing” for businesses for the next three years and with an intention to make it permanent.

He told the Commons: “That means that every single pound a company invests in IT equipment, plant or machinery can be deducted in full and immediately from taxable profits. It is a corporation tax cut worth an average of £9 billion a year for every year it is in place.”

For smaller businesses, the Annual Investment Allowance is being increased to £1m, meaning 99 per cent of all businesses will be able deduct the full value of all their investment from that year’s taxable profits.

There will be additional tax support to help research and development intensive SMEs. For every £100 spent on R&D, eligible companies will be able to claim £27 back, helping them to invest in more R&D.

Mr Hunt also announced that fuel duty will be frozen and a 5p reduction will be maintained for a further year.

He unveiled a raft of measures aimed at increasing the UK’s workforce. They include what he described as the “biggest change to our welfare system in a decade”, with reforms aimed at supporting more disabled people into work.

He went on to announce plans to increase the pensions’ annual tax-free allowance from £40,000 to £60,000 along with abolishing the Lifetime Allowance – previously set at £1.07m.

Mr Hunt said that move would incentivise “our most experienced and productive workers to stay in work for longer”.

Focusing on the over-50s, he said he would increase the number of people who get “mid-life MOTs” from the Department for Work and Pensions, helping them assess their financial situation.

A new apprenticeship scheme, called “returnerships”, will be introduced for over-50s wanting to return to work in a new sector.

He went on to unveil reforms in childcare aimed at helping parents get back into work. These include an increase in funding for nurseries.

Mr Hunt also announced 30 hours of free weekly childcare is being extended to cover children below the age of three – as long as both parents are working at least 16 hours a week. It will eventually cover all children from the age of nine months.

The government will also fund schools and local authorities to increase supply of wraparound care so all parents of school-age children can drop their children off between 8am and 6pm.

Mr Hunt also announced 12 investment zones, which he said can be new ‘Canary Wharfs’. Areas chosen include Greater Manchester and Liverpool.

The rate of price rises, or inflation, is forecast to fall to 2.9 per cent by the end of 2023, according to the Office for Budget Responsibility (OBR).

Mr Hunt told the Commons the government was on track to halve inflation, get debt falling and grow the economy. And he said the OBR is now forecasting there will be no technical recession, adding: “We are following the plan and the plan is working.”

The government will also add a total of £11bn to the defence budget over the next five years and it will be nearly 2.25 per cent of GDP by 2025.

To encourage investment, nuclear power will be classed as “environmentally sustainable”, subject to consultation. That move will give it access to the same investment incentives as renewable energy.

• To discuss any issues raised by the budget please contact me on 01772 430000