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Chancellor constrained from all-out Budget for business

Business lobby group the Forum of Private Business has given George Osborne an overall thumbs-up for his Budget.

The not-for-profit employer support organisation welcomed much of what was in the Chancellor's speech, with the only immediate criticism his inaction on business rates.

But it said the Employment Allowance, worth £2,000 to all businesses with employees, was a real boon for smaller UK businesses.

"We've been calling for a scheme like this for a number of years now, so our only disappointment with this is that it's 12 months away, and that's a mighty long way off," said the Forum's Head of Policy, Alex Jackman.

"While business will love the concept, the fact that no financial benefits will be felt until April 2014 somewhat takes the shine off it. Still, it will allow for businesses to prepare and plan ahead.

"The bottom line here though is that this initiative will have a double function, that is to either incentivise employers to take on more staff, or to take the saving and boost their profitability. For many small firms who've been operating on extremely small margins the latter would be welcome relief.

"For businesses looking to grow though, it means they'll be able to employ an additional employee earning £22,400, or an additional four employees working full time on the adult minimum wage without any increase in their employer NICs. That's got to be good for employment figures and therefore the wider economy."

Jackman also welcomed the growth vouchers concept, but said this was not nearly well funded enough.

"It's a recognised fact that expert advice on key business processes and issues can significantly improve business performance – small firms who take advice are much more likely to survive," he said.

"Growth vouchers will help if it enables SMEs to do this. £30 million may seem a small amount but we are already working with government on this project to see how best their investment can be used."
 
The Forum was however critical of the Chancellor's inaction on business rates, which it said would have been a blow to many SMEs hoping for at least a freeze.

"Ask any small businesses what they wanted to see from this Budget and many will have said: ‘action on business rates'," added Jackman. "We said before the Budget government couldn't keep clobbering businesses with hike after hike, and unfortunately we haven't seen that sentiment acknowledged today by Mr Osborne.

"It was really a case of enough already years ago, and April's increase which now goes ahead as planned will mean rates have spiralled by a mammoth 13% in just three years. There aren't many businesses who've seen income increase by anything close to that figure with sluggish growth and recession to contend with in the same period.

"Business rates have risen so much in just a few years they are the number one enemy to many small firms, and we believe they are a big part of the problem with our high streets too. It's disappointing to see no action here – it was the obvious way to relieve pressure and is a missed chance for quick relief for business."

There was good news for the pub industry though with the Chancellor calling time on the beer tax escalator. Commenting on that Jackman said: "While many in the industry will see this as George Osborne doing too little, too late, we still think it's a victory for publicans up and down the country who've battled against steep increases during extremely lean times, and in an industry still struggling to find its way in post-cigarette-ban Britain.

"Coupled with the shelving of September's fuel duty increase, this news will be music to the ears of those landlords in outlying rural areas who rely on customers travelling out to them.

"But we mustn't forget, the UK still has some of the most punishing alcohol duty levels in Europe, and while today's development is good for the industry, we hope it won't be a one-off crowd pleaser by the Chancellor. Ideally he needs to freeze beer duty for the foreseeable future and any increases down the line need to be sensible and proportionate, otherwise today will count for nothing."
 
On fuel duty Jackman added: "The Chancellor was absolutely spot on with this. No one wants to see fuel prices any higher than they are and small businesses will welcome that. Let's not forget though that prices are fast approaching record highs – any increase would have been reckless so this was just basic common sense.

He added: "We still feel the government needs to implement some kind of fuel stabiliser. The only way we're going to see anything approaching a fair price for fuel in the UK will be via a mechanism that works to bring fuel tax down when prices are high. Such a system would mean prices as they stand now would not be hovering just shy of £1.50 and taking money from the pockets of consumers better spent elsewhere in the economy.

"Unfortunately the UK will now suffer for another year at the mercy of fluctuating oil prices right when we need it least because of the Chancellor's failure to introduce such a system."

Summing up the Budget, Jackman said: "There was enough in the Chancellor's speech to keep business happy – for now anyway. But it's just a sticking plaster if growth doesn't really kick in for another year.

"Pressures for cost reduction will keep piling up until the economy sees some real growth. While we welcome the measures in here for short-term help, longer-term worries remain, and unfortunately once again a lot will rely on what happens in Europe and beyond in 2013."

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