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Budget places businesses at the centre of recovery

The single biggest risk to the economy at present, is Government spending cuts; an issue that has divided the major parties in their election campaigns thus far. 3 in 4 businesses are fearful of a double-dip recession and this budget presented an opportunity to allay some of those fears.

The Chancellor seems to have adopted an approach that suggests, quite rightly, that business will be at the centre of the recovery.

Key announcements from yesterday include:
- Business Rates reductions
- ‘Fast Growth’ Investment Fund
- Capital gains relief
- Green Investment Bank
- Public sector procurement opportunities for SMEs

Click here to read the full article 

Click here to hear Daniel Fell, Head of Policy at Doncaster Chamber, speak to Radio Sheffield regarding the impact on business

FULL BUDGET REPORT 

Departmental spending

2010/11: total public spending to increase 2.2% in real terms

2011 onward: cuts and efficiencies of £20bn-plus identified prior to Spending Review, including civil service relocation away from London (15k within next five years), coupled with a long-term strategy to reduce civil service in London by one-third over the next decade, with at least 50% moving outside the Greater South East.

Asset sales to reduce debt – Dartford Crossing, Tote, Student Loan book, etc.

Investment/Infrastructure spending

Strategy for National Infrastructure launched

New infrastructure investment bank with £2bn (split public/private) – for transport and energy

Roads: £100m to pay for repairs to local roads; £250m for improvements to motorway network including hard-shoulder running.

£60m to help development of on-shore wind turbine supply chains

Broadband: plans as previously announced

Fiscal forecast

Size of contraction during recession: 6% peak-to-trough.

2010/11 forecast growth 1.0%-1.5%

2011/12: forecast revised downwards to 3.0-3.5%

Inflation forecast: Government predicts that inflation spike (currently at 3pc) will be temporary

Borrowing expectations 2009/10: £167bn (down £11bn from PBR); £163bn for 2010/11; £131bn 2011/12; £110bn 2012/13; £89 for 2013/14; and £74bn 2014/15.
 
Deficit reduction plan: 11.8pc of GDP to 5.2pc over four years

Forecast net debt as a percentage of GDP will peak at 75% in 2013/14

Banking

One-off bank bonus tax raised £2bn – more than double estimates.

New guarantee of a basic bank account for all 

Rise in bank lending targets to support viable SMEs – from March 2010, RBS and Lloyds have legally binding lending commitments (LBG: £44bn gross lending to business; RBS:£50bn gross lending to business).

Fast-track Credit Adjudication Service to address credit complaints from SMEs

Employment

Older workers: extend tax credit support by reducing minimum number of hours needed to be eligible

Consulting on reform of or scrapping of the Default Retirement Age – BCC will fight against this.
Extend guarantee of a job, work placement or training to under 24s out of work for six months to March 2012

Public Sector Pay

Confirmation of PBR announcement of 1% cap on all public sector pay settlements (2011/12 and 2012/13); cuts to senior civil service salaries; public sector pension contributions will be capped by 2012/13; greater contributions from high-earning public-sector workers.

Regulation

Financial sector: on-going G20 reforms to capital, liquidity, etc to ensure financial sector risk is curbed. Continued support for an international bank levy.

Better regulation: commitment to an annual forward regulatory programme; consideration of more rigorous benefit-cost analysis prior to regulating

BUSINESS SUPPORT MEASURES

Enterprise Finance Guarantee

EFG to continue through to April 2011.

HMRC ‘Time to Pay’

Extended through whole of the next Parliament

SME equity financing

UK Finance for Growth – name for new National Investment Corporation. Oversee £4bn range of finance support for businesses. Include new Growth Capital Fund to provide fast-growing companies with capital; will grow to £500m

Manufacturing

Targeted support for specific industries, including computer games

R&D

£35m University Enterprise Capital Fund for spin-out companies

Extra one-off fund of £270m for universities for 2010/11 to create places in key STEM subjects

10% corporation tax rate to income from UK registered patents from April 2013

Accelerated Development Zones

£120m grant for establishment of regeneration zones to enable key infrastructure investment

Trade support

No significant announcements. UKTI and ECGD to be co-located in a single building

TAX CHANGES

Income Tax

No new announcements. Previously-announced 50% rate over £150k comes into effect April 2010; tax reliefs for pensions for those over £130k progressively removed
New tax avoidance measures to promote compliance and increase revenue.

ISAs / Savings

ISA limit up to £10,200 as previously announced. ISA limits will increase annually in line with inflation.

Capital Gains Tax

No increases in main rate of Capital Gains Tax

New doubling of Entrepreneur’s Relief for CGT – lifetime threshold to increase to £2m.

VAT

No further changes

National Insurance Contributions

1p employer NICs rise (to 13.8pc)

Corporation Tax

No changes on corporation tax. Small company’s rate will remain 21% this year, but will increase to 22% as planned in April 2011.

Corporation Tax Allowances

New doubling of Annual Investment Allowance to £100,000.

Enhanced capital allowances will end in April 2010, as originally planned.

Business Rates

Empty Property Rate Relief threshold will remain at £18,000 for an additional year

Temporary Increase in level of small business rate relief – no business with rateable value up to £6000 will pay business rates for one year from October 2010 to October 2011. Also reductions for businesses between £6000-12000 rateable value.

Cut business rates for SMEs for one year from October

Stamp Duty

Double stamp duty threshold for first-time buyers to £250,000

Funded through an increase in stamp duty on £1m-plus homes to 5%

Inheritance Tax

Freeze thresholds for a further four years

Fuel Duty

Pre-announced rise to be staged rather than all-at-once. To rise by 1p in April, 1p in October, 1p in January 2011

Vehicle Excise Duty

HGV duty has been frozen.

Alcohol and tobacco Duties

Pre-announced rises on alcohol to go ahead. New extra taxation on cider (10pc above inflation).

Tobacco duties to rise 1pc above inflation.

Pensions

No new announcements post-PBR. Personal accounts roll-out to be phased in – beginning in October 2012, but only 1% employer payment until 2015, going up to 2% in 2016 and 3% in 2017. Similar arrangements will apply for employees.

New businesses starting up between 2012 and 2015 will not have to pay until after 2015.

Public procurement

Increase by 15% number of Government contracts going to SMEs throughout the supply chain.

80% of invoices to be paid within 5 days

Copper wire tax

50p landline tax for universal broadband service to go ahead in 2010 Finance Bill