Why didn't the Chancellor mention the measures taken to support small business?
Five minutes after the Chancellor sat down, business was already baying for his blood. The changes in duty on alcohol announced in Alistair Darling's Budget would have a big impact on the small businesses that dominate the leisure sector; the proposed changes to taxation for so-called "non-doms" will be reviewed but not scrapped; the changes to capital gains tax taper relief, albeit with the concessions already made to small businesses, would also be implemented as planned in April 2008.
The Chancellor's overall purpose was to reassure: he focused on stability, he emphasised the government record on growth, inflation and unemployment and he celebrated the apparent "resilience" of the UK economy to the pressures of global downturn. A host of reviews were announced and there was the now obligatory commitment to the public expenditure programme within the parameters of the "golden rule": spending only on investment over the economic cycle.
Before the budget, business leaders had been saying, just leave everything as it is and, in a way, that was exactly what the Chancellor did. There was a further reduction in corporation tax announced, which can only be celebrated, but other than that, and the obligatory increases in taxes on cigarettes and alcohol, this was a "holding budget". As an economist, it's possible to quibble with the Treasury's growth model and the fiscal hole in the Chancellor's budget, but overall, this was a maintenance operation with nothing particularly stunning in it at all.
If there were so few surprises, then maybe it was the tone of his speech that angered the commentators after he sat down. Perhaps the increasingly tense relationship between business and government was looking for an outlet. Or perhaps he just didn't report on some of the things that were hidden in the surrounding documentation but that were designed to improve the environment for small business. Arguably had he done, the verdict would not have been as immediately negative.
As an observer of and participant in the entrepreneurial sector now for nearly ten years, it was frustrating that the Chancellor made no mention of the Ten Year Enterprise Strategy that was published simultaneously. In this document, some of the things that many of us have been arguing for a long time should be in place were launched.
For example, the Chancellor did mention a new £12.5m capital fund investing in women-owned growth businesses. But what he didn't mention was the support structures that were being put in place alongside this regionally and nationally that go a long way towards addressing some of the unique challenges that women entrepreneurs face. There will be a media campaign promoting women's enterprise, women's business centres delivered in consultation with the Regional Development Agencies and a national mentoring and coaching network that is targeted specifically at women entrepreneurs.
Well over a third of the UK's adult population let the fear of failing prevent them from starting a business, according to the Global Entrepreneurship Monitor. To address this, the Enterprise Strategy announced a change in insolvency law by the end of 2009 to give insolvency officers discretion over whether or not to post notification of insolvencies in local newspapers. The goal is to take away the stigma and embarrassment of bankruptcy and this is a positive step in the right direction.
The Chancellor also mentioned the extension of access to the Small Firms Loan Guarantee Scheme by increasing lending allocations by 20 per cent and allowing access to it by older growth companies. But additionally £30m has been committed to extending mezzanine finance through the government's Enterprise Capital Funds; there is to be a review of government procurement procedures in relation to factor or invoice-based financed businesses as this limits access for small companies and £10m has been ring-fenced for a risk capital fund for social enterprises. There will be a third round of Enterprise Capital Funds.
Taken together with streamlining of regulations for Small Businesses, these measures have to be seen as good news for the country's beleaguered entrepreneurs. If the credit market generally in the UK is difficult, then broadening access to growth finance and emphasising the importance of innovation and entrepreneurship can only be a good thing.
On a day which was always going to be difficult for the Chancellor, surely it would have shown a belief in his own growth strategy had he given a public affirmation of belief in our entrepreneurial and innovative future.
Posted 13 March 2008 : Director.co.uk