Budget not as generous as it first appears

March 25, 2010

Julie MeyerJulie Meyer is CEO of Ariadne Capital, a technology investment and advisory firm backing entrepreneurs in media, moble Internet and communications. The opinions expressed are her own.-

I recently spoke at an IBM event alongside former chancellor Norman Lamont about the issues that face entrepreneurs and how we can turbo-charge these value creators to help rebuild the country’s wealth.

As I digest Wednesday’s budget and what it holds for entrepreneurs, I’m thinking back to that night and it convinced me not to be too impressed with what at first looks like it could be a generous budget.

At a simplistic level, it splits down into taxes and funding. It doesn’t get talked about much, possibly because it’s so dull, but employers’ National Insurance is one of the most onerous taxes on business. It’s ironic that entrepreneurs are taxed for paying salaries when you think about it.

Rather than hold back the increase in NI, (1 percent for employers), Chancellor Alistair Darling has opted to cut business rates for a year for firms in premises whose rates are under 6,000 pounds – feels good except that when you really look at the figures, it’s a move directed mainly at the small retailer.

More generally the extension of a time to pay scheme for corporation tax is useful, and has kept many businesses afloat this year, but reduction rather than deferment would be more helpful until certain thresholds are reached to give start-ups a true leg up.

As a general principle, I favour cutting taxes in order to stimulate wealth creating activity which grows the size of the taxable pie overall.

Lowering tax creates confidence and an expectation of recovery, supplying much needed oxygen to the economy. But at the other end of the tax spectrum for the successful few, Darling has doubled the lifetime allowance for capital gains at 10 percent from 1 million to 2 million.

This is clever showboating as the loss in revenue is a pimple compared to what it would have cost to keep NI at its current level. The NI increase will raise around 3 billion pounds in 2011-12, according to Price Waterhouse Coopers.

So on to the funding. Much is made of the “mobilisation” of the EU’s financial institutions to the benefit of our innovative businesses to stimulate venture capital and SME loans. This is a subject I know something about.

While it’s a good thing to recognise that this country is and can be an innovator on a global stage (computer games have been elevated to the same tax incentive investment status as films in this budget), it’s important that the funding decisions rest with people who know the sector.

The key to successful early stage investing is to know how to minimise the risk of investing in things that don’t exist yet. The computer games industry overtook films a while back in terms of revenues generated for the UK but it’s taken the government until now to change its investment status.

So it makes me wonder if the government appointed fund managers might be similarly behind the curve?

Here’s hoping that the European Investment Bank’s ambitious 3 billion pound fund and the 35 million pound enterprise fund earmarked to help university-launched businesses will each end up in experienced hands.


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Please could you let me see in pounds what is in the budget for senior citzens we are not as afluent as people think

Posted by john trainer | Report as abusive

John Trainer can be assured there was nothing in the budget for senior citizens and that they will be all poorer by March 2011 (unless of course they happen to be entreprenurial dynamos).

Posted by Jimmer XXX | Report as abusive

Its nice to think that somebody still believes that the UK can work its way to rebuilding its wealth.

Unfortunately, this is just nickles and dimes economics, what ever the government gives out now will have to be paid back by the businesses and tax payers plus interest tomorrow, along with the other 180 billion pounds that the UK has borrowed to get to these dizzy lows.

The days of using debt to start a business should long be over, but it seems some still have faith in the old ways…

Posted by steams | Report as abusive

Step back from the details of the non budget and look at the big picture.

The present economic disaster and corruption within the financial and political systems were allowed to happen on NEW LABOUR’s watch. The public was completely misled as to the end of boom and burst. That was pure lies!

The leadership took the UK to the edge of bankrupcy. Criminal financiers have not been held to account. THESE ARE FACTS! How far corruption has penetrated other aspects of UK administration has still to be investigated (e.g. Why are government contracts never completed on time and on budget).

This political party is a FAILURE! It must be kicked out of office and start again with a CLEAN SHEET. That is the big picture.

The life experienced over 50’s have been through difficult times before, understand political ineptitude, recognise liars and have been able to act to make significant changes in government in the 60’s, 70’s and 80’s. The over 50’s must get out and VOTE, as their numbers will account to a very significant majority to decide the necessary changes required for improved morality, justice and democracy.

Posted by Alan | Report as abusive