Page last updated at 16:28 GMT, Wednesday, 24 March 2010

Budget 2010: Darling aims to help UK business

Sterling notes
RBS and Lloyds will provide a total of 94bn of new business loans

Chancellor Alistair Darling has unveiled in his Budget a package of measures designed to help UK business.

To aid what he calls "fledgling businesses", as well as existing ones, business rates will be cut for one year from October.

And, to "help small businesses expand", he is also doubling the Annual Investment Allowance to £100,000.

He said this would allow most firms to deduct, in the first year, from taxable profits all investments in plant.

However, the Institute of Directors, while welcoming this initiative, said it thought most firms would not benefit "because their investment is smaller than the old £50,000 limit".

'Modest but helpful'

Mr Darling said the move on business rates would mean a tax reduction for more than half a million small businesses in England - 345,000 of which, he said, would pay no business rates at all.

Mr Darling also announced that he was doubling the entrepreneur's relief for capital gains tax.

At present, the first £1m of lifetime gains are taxed at a lower rate of 10%, rather than the main rate of 18%. That threshold will now be increased to £2m.

BUDGET 2010: AT-A-GLANCE
Deficit not as big as predicted
First time buyers stamp duty cut
Planned petrol duty rise staggered
Force state banks to lend more
Crackdown on tax evasion
Strong cider and alcopop tax hike
Growth package to boost jobs
Bank accounts for all citizens
Green investment fund

"After two years of economic downturn, the chancellor has clearly recognised the need to place business at the heart of this Budget," said David Frost, director general of the British Chambers of Commerce.

"Doubling the annual investment allowance, help with business rates, and allowing entrepreneurs to keep more of their gains will prove especially popular."

The CBI called the moves "a series of modest but helpful changes" and said the doubling of entrepreneurs' capital gains tax relief would help investment in small businesses.

"However, it is the fiscal decisions over the next 12 months that will really determine the UK's economic future," said Richard Lambert, CBI director general.

There was also a raft of other measures, including news that over the next year, RBS and Lloyds between them would provide a total of £94bn of new business loans, nearly half to smaller firms.

"Revenue from banks will support many of the chancellor's initiatives - this shows clearly the value of the financial services industry to the UK," said the British Bankers' Association.

"The banks welcome moves to sustain the economic recovery and restore confidence, particularly as they focus their efforts on supporting mortgage borrowers and small businesses."

Growth fund

In addition, a new national investment corporation, to be called UK Finance For Growth, is envisaged as streamlining and improving government help to small and medium-sized enterprises, while overseeing £4bn of support for business.

COMPLETE BUDGET DOCUMENTS


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Other measures include a new Growth Capital Fund which will provide growing firms with private capital and should ultimately provide £500m of finance.

Commercial banks have so far agreed to contribute more than £100m.

Mr Darling also said that an extra 15% of central government contracts would be awarded to small and medium-sized businesses.

It is envisaged that that could mean up to £15bn of new business across the whole of the public sector.

'Huge relief'

The Federation of Small Businesses (FSB) said it welcomed help for small businesses, but was disappointed that the chancellor was proceeding with the proposed rise in National Insurance Contributions.

The FSB said it was also pleased with the announcement to take 345,000 small businesses in England out of the business rates system.

"This proposal will come as a huge relief to small businesses on the High Street," it said.

The FSB added that it looked forward to the introduction of the new credit adjudicator, giving small businesses the opportunity to appeal against a bank decision to reject a loan application.

"More competition for the High Street clearers has been a long time coming," it added.

'Foundation' of success

Meanwhile, next month's increase in fuel duties will be done in stages, with fuel duty rising by a penny in April, followed by a further penny rise in October and the remainder in January.

"I find it encouraging that fuel duty is going to be spread over the year. That will help small businesses," said Naomi Anderson, who runs Green Hands beauticians in Brierley, Herefordshire.

To boost a carbon-friendly economy, the government is also to establish a Green Investment Bank, controlling £2bn of equity.

It will focus on green transport and energy, including offshore wind power, while £60m will be offered to develop ports hosting manufacturers of offshore wind turbines.

And an extra 20,000 university places will be made available, mainly for students studying science, technology, engineering and maths subjects.

"Science, technology, engineering and mathematics are the subjects that will provide the foundation for the future economic success of the UK," said the UK Aerospace, Defence and Security Industry trade body, as it welcomed the move.

Cider concerns

However, one sector of UK industry has been hit - Mr Darling said that duty on cider would increase by 10% above inflation from midnight on Sunday.

"We are not pleased, a 10% increase is quite devastating news," said David Sheppy, of Sheppy's Cider, a family-owned Somerset cider-maker which supplies most supermarkets in the South West and some nationally.

Louisa Sheppy
Sheppy's Cider is run by David Sheppy and his wife Louisa

"A lot of money has been put into investment in the cider industry, and we don't now want to see that investment wasted."

And Mr Darling has also said that in September changes will be made to the definition of cider "to ensure specific strong ciders are taxed more appropriately".

That could hit firms such as Sheppy's, which Mr Sheppy says has some naturally strong ciders among its products.

"We are more concerned about any potential further changes in the duty bands of cider according to their strength," he said.

"That is a big concern for us, that we could be hit again, but at the moment we don't know exactly what Mr Darling's plans are in this area."

Another unimpressed business person was Dr Tony Lees of Dentanurse, which produces dental products for dentists and the public from its base in Preston-on-Wye, Herefordshire.

He said: "I find the Budget very difficult to evaluate, but at first impression it did not enthral or excite me.

"It is also very hard to plan at the moment, because if the Conservatives win at the General Election they may scrap some of these things announced today."



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