Budget 2010: Promise of billions in bank lending to boost small firms
Alistair Darling puts help for struggling SMEs at the heart of his budget with pledges of new lending and cuts to business rates
Lloyds, along with RBS, has committed to £94bn of new lending.
Alistair Darling announced a series of measures aimed at supporting small
businesses yesterday, including the promise of billions in new lending from
state-controlled banks, cuts in business rates and the extension of an
arrangement that allows struggling firms to spread their tax payments.
The measures were broadly welcomed by businesses, although the reception was
not unalloyed, with disappointment expressed over plans to press ahead with a
1% increase in employer national insurance contributions from April next year
and an increase in the minimum wage, not mentioned in the chancellor's speech,
but included in a 228-page Treasury document published after he sat down. The
minimum wage will increase by 2.2% from £5.80 an hour to £5.93 in October.
Adam Marshall, director of policy at the British Chambers of Commerce, said
the minimum wage increase "took some of the shine off a budget that had
small and medium-sized businesses at its heart," claiming that it could
prevent some employers taking on new workers.
The package of measures had otherwise been described as "punchy"
by the Federation of Small Businesses, which represents more than 200,000 small
firms. "We wanted a budget that didn't disturb or create any huge
surprises, but in fact we were pleasantly surprised," said spokesman
Stephen Alambritis.
The chancellor said that between them, Lloyds and RBS had lent £38bn to
small and medium-sized enterprises (SMEs) over the last 12 months, and that the
banks had committed to an extra £94bn of lending over the next year, nearly
half of which would be targeted at smaller firms. Further competition on the
high street as new banking licenses are awarded and Lloyds and RBS sell off 900
branches would also make it easier for small firms to gain access to credit, he
said.
Among the other measures announced in the budget, Darling announced the
creation of a Growth Capital Fund, providing investment for fast-growing firms
that could eventually be worth £500m; a cut in business rates so that 345,000
small firms will pay nothing for a year; the doubling of the annual investment
allowance to £100,000; and the formation of an appeals process for small firms
that felt they had been unfairly turned down for bank loans, described as a
credit adjudicator.
"We can't take growth for granted," Darling said. "We can sit
back and hope for the best. Or we can recognise the role government can play in
providing a launch pad for businesses to succeed."
In addition, he promised the government would increase the contracts it
awarded to SMEs by 15%, amounting to an additional £3bn of business from
central government and a further £15bn from the wider public sector. He pledged
that 80% of invoices would be paid within five days by government departments.
The chancellor also said that the sometimes bewildering array of initiatives
already in existence for small firms would be streamlined under the banner of
UK Finance for Growth, which will oversee the existing £4bn of schemes. He also
announced specific tax relief for the UK's video games industry, and
launched a university enterprise capital fund to exploit the nation's research
base.
"There was a lot of politics in there, which is what everyone expected
and I have doubts about how much of it will be delivered given the election,
but there were some good things in there for small businesses," said
Julian Lewis, who runs Reading-based IT outsourcing firm Positive Computing,
which employs eight people and has revenues of around £1m. "The business
rate cuts were very good and the capital allowances are a good thing. There
were some specifics in there. The additional lending is good, but even if you
can get the money, the question is, at what cost? There was nothing in there
saying this would be good value."
Darling said that an initiative launched in 2008 allowing SMEs to spread tax
payments over a timetable they could afford had enabled 200,000 companies
experiencing financial difficulties to spread £5.2bn worth of payments. He said
the scheme would be extended over the life of the next parliament.
There had been concerns that the government might end the relief given to
entrepreneurs on capital gains. Currently, business owners pay just 10% on
gains of up to £1m instead of the general 18%. But Darling doubled the
threshold to £2m, a measure welcomed by Simon Walker, chief executive of the
British Private Equity and Venture Capital Association. "This will further
encourage entrepreneurship and foster innovation, as will the establishment of
the University Enterprise Capital Fund. The creation of a Growth Capital Fund
is also good news for British businesses."
Under the changes to business rates, the government will fund a temporary
increase in the level of rate relief so that small firms occupying properties
with rateable values up to £6,000 will pay no business rates for one year from
October.
But Richard Lambert, director-general of the
CBI, said: "There was more support for business than might have been
expected, with a series of modest but helpful changes. The doubling of
entrepreneurs' CGT relief will help investment in small businesses … However,
it is the big fiscal decisions over the next 12 months that will really
determine the UK's
economic future."
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