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A Budget review: one month on April 16, 2008

Posted by liverpoolchamber in British Chambers of Commerce, Business, News.
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President of the British Chambers of Commerce, Peter Mileham DL writes, with the economy in slowdown, the British Chambers of Commerce wanted to see Alistair Darling using his first budget as Chancellor to send a much needed positive message to businesses that would boost confidence.

In the BCC’s pre-budget submission, policies worth billions in extra revenue to the Treasury were highlighted. These included: the rise in small companies’ corporation tax from 20% to 21%; the next 2p fuel duty hike planned for April; the increase in the rate of capital gains tax from 10% to 18%; and income shifting legislation.


By announcing a change of stance on these and numerous other tax takes, the government could have made the initial move towards winning back the support of business.

There were some welcome announcements, but the majority of this budget did not address the most pressing of business concerns, particularly those which affect small and medium sized enterprises (SMEs).

Although the main rate of corporation tax is decreasing from 30% to 28%, by ploughing ahead with the planned 1% increase in small companies’ corporation tax, the Chancellor has added serious pressure on vulnerable smaller firms. Abandoning this plan would have been a more desirable approach at a time when the banks are tightening lending criteria and the economy stuttering.

The postponement of next month’s 2p fuel duty rise was the most noticeable olive branch to businesses. With the price of petrol at the pump astronomically high, Mr Darling was correct not to introduce April’s levy. However, considering the Chancellor reduced his own economic growth forecast for 2008, he should have scrapped the 2p rise altogether, rather than merely deferring it for six months.

On capital gains tax, the concessions previously announced in the form of an entrepreneurs’ relief were welcomed by many smaller business owners, but the concessions did nothing for the most entrepreneurial. Further concessions were called for to encourage enterprise, yet these were ignored in the budget, just as a reversal in the government’s stance on non-dom taxation was.

It was pleasing to hear specific reference to the SME community, who provide the core element of Chamber membership. Initiatives such as; the small firms’ loan guarantee, the target to give 30% of all public sector contracts to small firms, and the plan to impose a limit on the amount of regulation that can be imposed by Whitehall, are all welcomed. It was also satisfying to see the government delay implementing income shifting legislation by 12 months.

Overall, this budget will be seen as one that fully committed to a series of tax hikes, rather than one that could have potentially restored a previously solid relationship. Sadly, businesses continue to feel that the Government has used them as an easy target to generate extra revenue.

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