smallbusiness.co.uk: Helping your business think big

As the spectre of a general election looms over Britain, this year’s pre-Budget report was inevitably going to be highly political, framing the economic debate for the run-up to June 2010.

It is little wonder that Darling moved to sate the public’s appetite for a curb on excessive bank bonuses with a 50 per cent tax on all discretionary bonuses above £25,000, particularly as bailing these institutions out has contributed to government borrowing of £178 billion. It seems this decision was designed to assuage voters’ anger at the fat cats clawing at our money, although it is more useful as a deterrent to the bonus culture than a serious effort to offset our debt.

But rather than open his pockets and declare ‘there’s nothing in the kitty’, the Chancellor decided to stick to his spending plans and defer cuts until next year  (leaving this for the next government to deal with the problem) and he has included some measures to help small businesses.

In our poll, 62 per cent of SMEs had set their hopes on a reduction in taxes rather than any government funding plans, with 30 per cent hoping to see VAT kept at 15 per cent, 17 per cent wanting to see national insurance contributions abolished and 15 per cent hoping for a reduction in corporation tax.

The deferral of the 1p corporation tax rise, the extension of empty property relief and the ‘time to pay’ scheme are likely to be well received, although many struggling SMEs may feel that the government could have done more and will not be happy that VAT is still set to go up to 17.5 per cent from January.

While the Chancellor’s announcement that the Enterprise Finance Guarantee will be extended is a welcome move, it is unlikely to seriously improve access to finance unless more pressure is placed on banks to lend.

Having revised his optimistic prediction of a 3.5 per cent retraction in the economy by the end of 2009 to a 4.75 per cent shrinkage, and with estimated growth next year of 1 to 1.5 per cent, it seems recovery will be fragile. So as the political parties prepare their battleground for 2010, small businesses will still be tightening their belts in the New Year.