Budget 2010: Entrepreneurs’ reactions

Views on Darling’s pre-election Budget from the business community

Ever since the abolition of Taper Relief, followed by the 50% rate of tax for high earners, a slightly bitter taste has lingered on the tongue of the UK’s most successful entrepreneurs. As the biggest creators of new wealth and jobs some have felt more than a little overlooked in past Darling speeches. But to the surprise of many, this year’s Budget actually delivered a few sugared pills. Granted there was no response to calls to scrap the planned increase in National Insurance contributions, but the doubling of entrepreneurs’ relief on Capital Gains Tax and increase in business rates relief was welcomed by many. Below are a few opinions from the people that really matter – the UK’s entrepreneurs.

General reaction

James Caan, Dragons’ Den: “The Budget outlined a clear set of priorities, even if there wasn’t a great deal of clarity over how they will be financed. On the whole, I welcome the focus on supporting business, and particular SMEs.”

Charlie Mullins, managing director, Pimlico Plumbers: “Basically the chancellor has produced a grossly political Budget, so cynical was he that he explained away his lack of spending cuts by saying they would ‘derail the recovery’ right now, but almost in the same breath said that they would be necessary in the future – conveniently, after the election. At certain times I thought maybe it was George Osbourne giving the speech there were so many Tory policies coming out, although crucially none on spending cuts! As far as I can see the only improvement in the figures comes from bad forecasting – the Met Office are more accurate than the Treasury.”

Joe Cohen, founder, Seatwave: “If 2009 was about making life easier for the individual and the big banks, 2010 is all about the entrepreneur. As the government recognises the crucial importance of small and growing businesses to the future of the economy, there are a range of measures here which will help SMEs to set up and expand. Governments can’t create entrepreneurs but they can foster an environment for small businesses to succeed and attract investment. This budget should give more entrepreneurs confidence that the UK can be a healthy environment for a start-up in an otherwise challenging market.”

Brad Burton, managing director, 4Networking: “I really approve of the measures which Alistair Darling has outlined to help small businesses grow. I would have added scrapping NICs for the first three years for new businesses, funded by some of the taxes that have been claimed from the bailed out banks. Small businesses are crucial for economic growth and I really feel that Darling has recognised that with his reduced rates and increased investment allowance.”

David Soskin, chairman, MySupermarket.co.uk: “This was a political budget designed not to create waves in the run-up to an election. It does little to tackle the dreadful state of the public finances. As usual, it betrayed the acute schizophrenia from which the Labour Party suffers when considering enterprise.”

Christian Arno, managing director, Lingo24: “The move on business rates, relief on capital gains tax and a doubling of the annual investment allowance are small measures, but added together, they make the entrepreneurial game a more attractive one. The additional support – from the Growth Capital fund to the commitment to award 15% of government contracts to UK SMEs – are also very helpful. All this said, we think this country will not start motoring economically (at least not in a sustainable way) until we as a nation are much more export-focused, like successful modern economies such as Sweden and Switzerland.”

Julie Meyer, chief executive, Ariadne Capital: “The best way to grow the economy is to grow the pie of revenue which is taxable, not grow or maintain tax at a high level on revenue which leads to a shrinking pie. If we lower tax, we create confidence and expectation of economic recovery – oxygen – to/for the economy. It seems to me that the elephant in the room is that we are just expecting the UK entrepreneur to work to grow revenue for taxable income but if he/she has a weight around their neck in terms of already too high NICs and other levels of regulation and tax, how can they compete in the marathon which is business?”

Jamie Murray Wells, founder of Glassesdirect.co.uk and chairman of Hearingdirect.com: “Until this government faces up to the deficit burden it has created (£6bn to £167bn in 13 painful years) and swallows the bitter pill it needs to credibly reduce this, Britain will never be as stable and attractive a place as it could be to invest and do business in. Some of the specific measures Mr Darling mentioned such as enhancing Entrepreneurs’ Relief and cutting corporation tax, are steps in the right direction but both Brown and Darling must address the elephant in the room.”

On the cut in business rates

Roger Taylor, managing director, Cambrian Associates: “This is a must, but does it go far enough? Most SME owners feel that they are being robbed, not just by their councils, but by HMRC.”

David Soskin: “Business rates are a dark cloud for many entrepreneurs so it is welcome that at this time of crisis many will have to pay no business rates next year.”

Dominic Monkhouse, UK managing director, PEER 1 Hosting: “Rate cuts are a bit of a blunt instrument. Those that don’t need help will get it anyway and those that do need help won’t get enough. If you’re going to give away a chunk of money you’ve got to make sure the money is going to the right people.”

On the new credit adjudication service

David Soskin: “It is good that Darling is encouraging the banks to lend more to small businesses but his idea of an office of fair lending sounds a bit daft and an excuse to create another quango.”

James Caan: “Although the merits of overriding market evaluations of risk are uncertain; this certainly proves that the Treasury is serious about this issue.”

On the £500m Growth Capital Fund and new umbrella organisation UK Finance for Growth

Joe Cohen: “The launch of UK Finance For Growth, should streamline public assistance to small businesses but to succeed it will have to be reflect the mindset of small business and entrepreneurial world and not that of Whitehall.

Jake Allen, founding partner of King & Allen: “While I was glad to see £2.5bn to boost small businesses’ skills and innovation, that money is only as good as its use is efficient. Government bureaucracy will inevitably create a degree of waste. That cash should be used to directly benefit small business in tax relief, rather than a series of top down prescribed initiatives. Freeing up the resources of business owners is the best way to ensure those extra resources are used as efficiently as possible.”

Hugh Robertson, founding partner, RPM: “I’ll be interested to see how the £2.5bn growth fund actually manifests itself, whether there will be real tangible action or whether this will be spent on initiatives like the business tsar Sir Alan Sugar which haven’t had a direct impact on small businesses.”

Dominic Monkhouse: “The idea of setting up another government body like the Fund for Growth to deal with bureaucracy is laughable. What we need is some ordinary, smart people who actually run businesses to come in, slash some of these bureaucratic bodies that just create red tape and put practical measures in place that get support to those who need it.”

On the agreement that RBS and Lloyds will lend £94bn (gross) over the next year with at least half going to small and medium-sized firms

John Cheney: “It is debatable if this is extensive enough to help these businesses. What was really needed were drastic changes to the Enterprise Investment Scheme (EIS) so that if banks aren’t supporting SMEs sufficiently then business angels can. The government should have improved tax breaks under the EIS to encourage even more angels to invest by removing the limits that individuals (currently £500,000) and companies (£2m) can raise in any one funding round.”

Piers Linney, chief executive, Outsourcery: “Banks are still withdrawing capital so the focus should be on the net increase in debt finance made available to small businesses.  £47bn of lending from RBS and Lloyds is still a limited commitment given the size of the problem and what is perceived as riskier lending will no doubt come at a price in terms of higher interest rates and fees.  Will what the banks have to offer actually be attractive to small businesses?”

On the decision to stagger the increase in fuel duty

Charlie Mullins: “The rise in fuel duty, although incremental, will have a huge negative effect on businesses.  When I filled up yesterday it was already 118p a litre – how is a further rise going to help the country?  A fuel duty hike will give inflation a kick as products, from newspapers to food, will all be affected by this rise.”

James Caan: “Fuel duty will go up and this will hit business and electorate, however in such economic climate and with such a large public debt, then we need to be prepared for some tough measures in places.”

On the plans to double the 18% Capital Gains Tax (CGT) ‘Entrepreneurs’ Relief’ threshold to £2m

Charlie Mullins: “It’s the role of businesses to create employment, but I can’t see anything in this Budget that will help my business, or any other, grow.  Nothing makes this point more than the increase in the ‘entrepreneurs’ relief’ for CGT; we should be encouraging investment, not disposal.”

James Caan: “Doubling threshold for entrepreneurs capital gains tax form £1 to £2million should  increase incentives for entrepreneurship.”

On the doubled annual investment allowance, to £100,000

John Cheney: “Raising the investment allowance is pointless when small business owners have no spare cash to take this up.”

James Caan: “The continuation and doubling of the investment allowance that encourages businesses to re-invest their profits and avoid tax whilst doing so will be a good boost to investment and overall confidence, and I think those businesses particularly in manufacturing will be releaved to have this support continued.”

Comments

(will not be published)