Business Bulletin

Darling ducks debt crisis

Nov 09 issue

The Pre-Budget Report failed to address pressing business issues, say entrepreneurs and economists.

Government borrowing will hit £178 billion for this year, £3 billion more than expected, but the chancellor says spending cuts will not be made until after the general election.

Roger Bootle, economic adviser to Deloitte, believes the PBR was a non-event. ‘It left the key economic and fiscal forecasts exactly as they were. There were some eye-catching measures, but any [hope of] reducing the forecast budget deficit was nullified by increased spending on a variety of initiatives. The net effect was just about zero,’ he says.

Alistair Darling announced an increase in national insurance rates of a further 0.5 per cent from April 2011, a return to 17.5 per cent VAT from 1 January 2010 and a one-off 50 per cent tax on bank bonuses of over £25,000.

Juliet Davenport, CEO of renewable energy company Good Energy, says the planned 0.5 per cent increase in national insurance contributions for 2011 (amounting to a 1 per cent hike over today’s rate) will impede economic recovery. She adds, ‘The rise is a big negative because it’s an incentive to reduce overheads in terms of the number of people you have, which is a shame when the goal is to get people back to work.’

Darling provided some relief to businesses by delaying the 1p increase in the lower rate of corporation tax, extending empty property rate relief for properties with a rateable value of £18,000 or less and continuing HMRC’s “time to pay” scheme, which he said had helped over 160,000 businesses.

Paul Webb, tax partner at Robert James Partnership, says that while the PBR was ‘nothing to get excited about’, it could have been worse for businesses. ‘Luckily, [the chancellor] didn’t apply the bankers’ brush
to entrepreneurs…It was as good as could be expected given the current state of the economy,’ he says.


Editor's View Business Bulletin Trailblazers Business Tools Finance Expansion Strategy Leadership Flotation Exits Columns Enterprise News Deal Listings Backchat	Business Bulletin Darling ducks debt crisis Nov 09 issue The Pre-Budget Report failed to address pressing business issues, say entrepreneurs and economists. Government borrowing will hit £178 billion for this year, £3 billion more than expected, but the chancellor says spending cuts will not be made until after the general election. Roger Bootle, economic adviser to Deloitte, believes the PBR was a non-event. ‘It left the key economic and fiscal forecasts exactly as they were. There were some eye-catching measures, but any [hope of] reducing the forecast budget deficit was nullified by increased spending on a variety of initiatives. The net effect was just about zero,’ he says. Alistair Darling announced an increase in national insurance rates of a further 0.5 per cent from April 2011, a return to 17.5 per cent VAT from 1 January 2010 and a one-off 50 per cent tax on bank bonuses of over £25,000. Juliet Davenport, CEO of renewable energy company Good Energy, says the planned 0.5 per cent increase in national insurance contributions for 2011 (amounting to a 1 per cent hike over today’s rate) will impede economic recovery. She adds, ‘The rise is a big negative because it’s an incentive to reduce overheads in terms of the number of people you have, which is a shame when the goal is to get people back to work.’ Darling provided some relief to businesses by delaying the 1p increase in the lower rate of corporation tax, extending empty property rate relief for properties with a rateable value of £18,000 or less and continuing HMRC’s “time to pay” scheme, which he said had helped over 160,000 businesses. Paul Webb, tax partner at Robert James Partnership, says that while the PBR was ‘nothing to get excited about’, it could have been worse for businesses. ‘Luckily, [the chancellor] didn’t apply the bankers’ brush to entrepreneurs…It was as good as could be expected given the current state of the economy,’ he says.