Yesterday, Chancellor George Osborne made a bullish speech in support of the new Budget. Carefully choosing his words so as to disparage the Labour government that he believes caused Britain’s economic woes, while looking forward to a brighter future, Mr Osborne was keen to stress that the Tory economic salvation would include everyone, not just the rich.
“Five years ago, our economy had suffered a collapse greater than almost any country. Today, I can confirm: in the last year we have grown faster than any other major advanced economy in the world,” he said. “We choose jobs. This Budget does more to back business and make work pay, so we create full employment. We choose the whole nation.”
While Osborne’s rhetoric may grab the headlines, businesses will likely be more concerned with the hard facts. The Budget is a complicated mixture of legislative plans and proposals, so it’s important for business owners to know exactly how it is going to affect them.
In general, the 2015 Budget was largely welcomed by business leaders. Economic estimates indicate that the government will continue to decrease the national deficit, until running a surplus in 2018-19. The added financial stability and consistency promised by the Budget will help the nation as a whole, including businesses.
Small businesses were also boosted by the news that the business relief rate, which was doubled to 100 per cent relief for properties with a rateable value of £6,000 or less, has been extended a further year until March 2016.
Osborne has also pledged to simplify tax returns, which should benefit smaller firms that struggle with filing the large amount of paperwork currently associated with tax rates. As part of the new proposal, individuals and small businesses will have online digital tax accounts, meaning firms will feel like they are paying one single business tax rather than reaching out to an accountant to make sense of it all.
The government also outlined some approaches to diversifying the economy in order to help businesses located outside of London. Companies based in Greater Manchester will now be able to keep 100 per cent of growth in local business rates. The proposal has been hailed as a key step toward greater fiscal devolution and provides Manchester with the means to transform itself into a “Northern Powerhouse.”
The Chancellor also outlined the government’s commitment to introducing ultra-fast broadband throughout the country. The promise to deliver speeds of 100Mbps to all properties will certainly prove helpful to business that are based in less well connected areas. Osborne also reiterated his desire to see further investment in the Internet of Things.
One of the troubling aspects of the Budget for businesses is that there is still much economic uncertainty. Although the extension of the doubled business rate relief will be welcomed, the announcement was preceded by reports that the rate will undergo a serious review. What this could mean for smaller businesses looking beyond March 2016 is unknown, but uncertainty, of any kind, does not encourage business growth.
The Annual Investment Allowance, which currently gives businesses a 100 per cent deduction of plant machinery and expenditure is scheduled to fall in January 2016. It is currently offered for the first £500,000 of expenditure, but is predicted to return to just £25,000. During his speech Osborne was reluctant to talk about the issue, stating that a decision will not be confirmed until the Autumn Statement. The lack of clarity will again be concerning, particularly for smaller businesses.
Proposals to reinvigorate the UK’s energy industry through the creation of a tidal power lagoon at Swansea Bay were also highlighted, but again have yet to be confirmed.
Although it may seem cynical, many critics of the new Budget will argue that it does not tell the whole story, especially with a General Election scheduled for May. The opposition, for example, is suggesting that the Tories have a secret plan to scrap the NHS. Whether or not either party can be trusted to be wholly honest regarding its economic proposals in the run up to the big day is difficult to say. And that, unfortunately, is the ugly side of politics that disadvantages businesses and individuals alike.