smallbusiness.co.uk: Helping your business think big

So the cider drinkers are happy, but what about the rest of us?

As with any budget, George Osborne’s accounting for the nation’s finances will be deemed as either ‘tough’ or ‘fair’ depending on where you sit in the social food chain. But at least this sounded and felt like a budget that acknowledged we are a country in which one pound in every four is borrowed.

Given the emergency budget’s eerie prelude, you half expected Osborne to propose that we start eating babies in order to get through Britain’s recessionary horrors. So business owners have been pleasantly surprised and relieved by what was announced; the new chancellor has evidently listened to the lobbying that went on in the run-up to the general election.

Concessions on NI contributions for start-ups outside of London and the South East are welcome, as is the cut in corporation tax. Osborne says he wants enterprise and exports to drive economic growth to lead the country out of recession, which will be music to the ears of the Confederation of British Industry.  

Likewise, the extension of entrepreneurs’ relief from £2 million to £5 million over a lifetime seeks to redress some of the harm that was done when taper relief was axed several years ago. As for capital gains tax, everybody knew it was coming and 28 per cent is reasonable in the circumstances.

Retailers will be up in arms about the rise in VAT. The 2.5 per cent hike from January 2011 caused a mutinous cacophony of disapproving ‘whoars’ in the house of commons – cries that were echoed by many in the office here. Some business owners are predicting that this measure alone will send us back into recession.

Perhaps in a nod to the scale of the task, Osborne postponed the review of the regional development agencies. The decision to extend the Enterprise Finance Guarantee scheme seemed to be greeted with a shrug of the shoulders and a sigh of ‘whatever’.

If you’re in the public sector, it may well feel like you’re being asked to dine out on a newborn. The cuts are brutal and may signal the beginning of the end of the welfare state as we know it. Mass redundancies in the public sector are inevitable (in areas like the Midlands where public sector employment is high, the fall-out will be severe), but it will also hit the large number of smaller businesses that gain work from state run enterprises.

A total of £76 billion in cuts has now been penciled in. It is difficult to see how Osborne expects unemployment to drop over the next few years in such circumstances, although the supposedly independent Office of Budget Responsibility claims the measures will not harm the country’s growth prospects, with the economy set to grow by 2.7 per cent in 2014-2015 (2010:1.2 per cent).

Osborne says the economy must grow to address the fiscal deficit. That’s why he wants enterprise to triumph and for the UK to transform into a mighty exporter of goods and services. The logic is sound regarding the need to encourage businesses to grow and create wealth and jobs, but it’s delusory to see this country as an exporter of goods in a meaningful sense. Besides, with other countries in Europe making similar cuts, where will the international demand be coming from? And the consequences of the public sector cuts shouldn’t be glossed over.

Double dip anyone?

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