'Tough' Budget finds broad business welcome

Chancellor of the Exchequer George Osborne's self-proclaimed 'tough but fair' emergency Budget - which seeks to tackle the country's debt crisis - has been broadly welcomed by business groups.

Despite acknowledging that the VAT rise - from 17.5% to 20% - will "hurt", the Federation of Small Businesses (FSB) praised the manner in which it will be introduced.

The organisation, which last week called for the Government to "think small first", had been lobbying for SMEs to be given time to prepare for the expected rise - pointing out that smaller firms find it harder than bigger ones to absorb such changes. The chancellor announced that change will not come into effect until 4 January, 2011.

However, the FSB had also called for a definite end date for any increase - something which has not been announced - "in order to prove that the Government is a low-tax administration".

And while the federation welcomed the move to exempt new businesses from National Insurance Contributions (NICs), which it brands a "tax on jobs", it reiterated its call for NICs to be scrapped for all existing businesses. It also called for the exemption to be implemented across all regions of the UK: currently it is believed that start-ups in certain areas will not benefit from the NIC 'holiday'.

Other welcome measures, the federation said, included the reduction to 20% in the Small Profits Rate - something which the group said would benefit 850,000 firms - and the extension of the Enterprise Finance Guarantee.

Meanwhile, the group also praised some of the personal tax measures announced, such as the increase in the threshold of Entrepreneurs' Relief from £2 million to £5 million, and the lower-than-anticipated rise in Capital Gains Tax (CGT), which increases from 18 to 28% for the highest earners, rather than the feared 50%.

FSB national chairman John Walker said: "The measures announced in the emergency Budget will go a long way to reducing the deficit and will please the 93% of FSB members who called for a clear plan on tackling the country's debt.

"We welcome moves to give a National Insurance holiday to start-up firms, but are concerned that with 70% of firms operating below capacity, those businesses already trading will not be helped.

"We need to see a full reversal of NIC increases to fully offset the 'tax on jobs' which the previous administration initiated."

Balancing act

Meanwhile, the Confederation of British Industry (CBI) hailed the chancellor's announcements as having "achieved his twin objectives of setting out a credible plan for the public finances and producing a convincing growth strategy for the longer-term".

CBI director-general Richard Lambert also praised the sensible balance on CGT - which he said would limit the impact on entrepreneurial activity.

"There was clear recognition in the Budget of the role that business needs to play in getting the economy back into shape, and generating the jobs and wealth needed to sustain economic recovery," he added.

"This Budget is the UK's first important step on the long journey back to economic health."

However, the Budget was blasted by TUC general secretary Brendan Barber, who branded the measures "economically dangerous and socially divisive".

"The one thing we can now say is that we are very definitely not all in this together," he added.

"Those on middle and low incomes have done worse than expected, and the rich have been let off much of what they feared.

"But we will all suffer from an economy that is now likely to be sluggish at best and with a double-dip recession at worst."

IMAGE Lewis Whyld/PA Wire

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