I think the general small business consensus on yesterday’s Budget is that, while there may not have been any earth-shatteringly good measures for SMEs, George Osborne certainly talked the talk.
His speech was peppered with promises to help small businesses and boost enterprise, and there was plenty of rhetoric about making life easier for SMEs through red tape reduction, more liberal planning laws and tax simplification.
Among a range of measures which he insisted would improve the fortunes of smaller firms, the Chancellor repeatedly proclaimed: “We want to make Britain the best place in Europe to start, grow and finance a business.”
However, several key parts of Mr Osborne’s announcement weren’t exactly as they appeared.
While he didn’t mince his words on the “exploitation” of the Channel Islands VAT loophole, the Chancellor’s actions on the issue left a lot to be desired. All that will happen for now (from November) is that the maximum value of goods big companies can sell VAT-free from their Channel Islands warehouses will fall from £18 to £15.
As anyone familiar with this issue will know, this reduction will do little to dent the industry as most of the products it’s based around (often CDs DVDs) go for less than a tenner. The full Budget announcement did promise to fully address the problem but next year’s Budget was put forward as a deadline for this – by which time countless high street shops and mainland-based internet retailers will have gone out of business.
Additionally, the ‘fair fuel stabiliser’ Mr Osborne outlined yesterday shares its name with the fair fuel stabiliser promised in the 2008 Conservative manifesto, but the two are entirely different things.
What the Conservatives pledged before the election was a device which would keep prices constant at the pumps by reducing the duty motorists pay as oil prices go up, and increasing duty they pay when (or should that be if) prices go down.
What George Osborne announced yesterday was an increased rate of tax on North Sea oil (up from 20p to 32p) as long as prices remain above $75 per barrel. Alongside this was the cancellation of the automatic fuel duty escalator (an inflation-linked device imposed by the previous Government) for the rest of the current Parliament, the cancellation of the forthcoming 1p increase in fuel duty and a 1p reduction in the existing rate of fuel duty.
So the Chancellor has taken the name of one policy and given it to another, and the casual observer probably won’t know the difference and will think the Tories have indeed fulfilled their pre-election pledge on fuel prices. However, this was the first cut in fuel duty for a decade, and something we’ve long been campaigning for, so even if it is something of a vote-winning trick, it’s certainly better than a kick in the teeth.
What I think is more important to highlight is the glaring absence of a fresh reduction in corporation tax for small businesses after the announcement of another sizeable cut in corporation tax for big businesses.
Over a four-year period, the Chancellor is cutting the higher rate for big businesses from 28% to 23% – that’s a drop of almost a third, which is huge in tax terms. However, for smaller businesses, there was nothing – no announcement of any new reductions.
Smaller firms will have to make do with the much more modest 1% reduction announced last year, which will leave tiny independent enterprises almost paying the same tax proportionally as huge multi-national conglomerates.
While the Government has put small businesses at the centre of its plans for a private sector-led recovery, the reality of its actions seem to say that it is more bothered about luring big businesses into the UK – more of an inward investment strategy rather than one to nurture home-grown enterprise.
Britain’s business owners are the ones who are going to create growth but they need incentives and a solid platform to do that. I think the Chancellor has missed an opportunity to really stimulate the SME sector – we wanted to see the lower rate reduced to 17%, which would have sent a clear signal to business owners and set the SME sector on fire.
What do you think about the disparity between the cuts in corporation tax for small and large businesses? What were your likes and dislikes of Budget 2011?
Feel free to add your thoughts via the comments section below.
