Firms concerned by 'lacklustre' Budget

After 10 years of practice, Gordon Brown could have probably delivered his annual Budget report in his sleep.

In fact, that is just what many small businesses say he has done.

Though he was expected to deliver few surprises, the chancellor has been roundly criticised by business pressure groups for his restraint in today’s Budget report.

Expanding eligibility for companies to claim tax relief on investments in research and development (R&D), £100m toward enterprise capital funds, streamlining business support schemes, tackling VAT fraud and training initiatives for unskilled women were all welcomed by business, but the £50bn question on everyone’s mind was will he do anything to cut red tape.

“We wanted to see a reduction in the overall regulatory burden which now stands at over £50bn since 1998,” said British Chambers of Commerce (BCC) president Bill Midgley. “Employers are fed up with paying for government regulation, let alone the time they have to divert away from actually running their businesses.”

The BCC joined the Forum of Private Business (FPB) and others who claimed the Budget delivers little and leaves a lot to be desired in terms of tackling excessive regulation, which over half of firms say is restricting their growth.

Entrepreneur Bruce Greig, however, founder of the 0800 Handyman chain, believes much of the fear and loathing around government red tape is a myth.

“Many regulations aren’t very invasive,” Greig said. “If you follow the rules, they’ll leave you alone. It’s much easier to operate your business here than it is in mainland Europe where you have to obtain a licence for almost everything.”

That said, he did not see much from the chancellor that suggests the government will try to improve the business environment, which is key to making the country competitive globally and improving start-up rates.

Greig is particularly concerned by Budget proposals such as government investment in start-up businesses and coaching initiatives for management at small, high-growth companies. To Greig, this represents government encroachment into areas in which it has no role.

“The government should not be involved in taking equity stakes in businesses,” Greig said. “If a business is good enough to secure investment, it will; it doesn’t need government intervention.”

The role of government, he believes, is to create the right environment for more businesses to start up, not to keep non-competitive companies on life support.

“I would have liked to have seen more examples of better regulation,” he said, adding that programmes such as the entrepreneurial summer schools are a good step in terms of exposing budding entrepreneurs to the skills they need, but he questioned whether the scheme is pervasive enough to matter.

A lot of proposals sound good, even against the backdrop of a jeering audience of opposition parties, but the real devil is in the details, according to Andrew Green, a tax partner at the law firm Mazars.

In his 60 minutes, the chancellor paid little mention to tax, yet today the government has released 64 press releases and 30-odd documents on policies that were not discussed at all, Green said.

“It was a dull Budget, but it’s dull if you only listen to what the chancellor said,” Green claimed.

Overall, the speech lacked surprises, but then Brown’s Budgets have lacked surprises for a number of years now, he said. And while he acknowledged that it is hard for anyone to cover so many policies in 60 minutes there are some important details that small firms may have missed.

One highlight of his business platform was the expansion of eligibility for R&D tax credits. But what the Treasury doesn’t realise, or at least has not acknowledged, is that many small companies do not understand the process of filing a claim.

Small firms are concerned about the cost of making a tax claim, and small amounts of tax incentives are not going to change their decision on whether to invest in a particular area, Green said. It’s a well-intentioned step in the right direction, but it will have little benefit for a company that is financially constrained.

Another codicil of this year’s report that most may have overlooked, he said, is the abolition of the seven-year window under which transfers to trusts are free from inheritance tax.

“When you’re in a family company, you might want to transfer shares into a trust,” Green said. “I think it is a major disappointment that this was not highlighted. The chancellor should’ve been saying to people that this is a fundamental change because we think it’s been abused.”

Green also expressed surprise that Brown did not mention the Arctic Systems case, which has potential huge implications for small, family-run firms if the Court of Appeal reverses a High Court decision in favour of the company’s owners.

“All the scare-mongering was for naught,” Green said, but adding that it could be a good thing for small business, because if there was a real risk of a change in tax policy, it would’ve come up.

Brown is highly competent, he said, and has a good team around him that is adept at communicating its positions. His silence indicates that he may have chosen to let sleeping dogs lie.