George Osborne’s autumn statement was a balancing act in more ways than one.
Kicking off the speech with a review of revised Office of Budget Responsibility forecasts that showed growth dropping to below 1% in 2011 (0.9%) and 2012 (0.7%), he looked towards a recovery to 2.7-3% in 2014-16 that would allow the government to achieve its long-term goal of balancing the budget by the end of this Parliament.
It was difficult to present the OBR figures as anything other than bad news, but once he had blamed Labour for the precariousness of the situation, Osborne devoted much of his attention to setting out a basket of business-friendly measures that included:
- A £21bn credit easing initiative based around a National Loan Guarantee Scheme to lower the cost of bank loans for businesses with turnovers up to £50m. Participating banks will be able to raise up to £20bn over the next two years under the guarantee sheme, provided they pass through this lower cost of funding to smaller businesses in lower interest rates on new loans and overdraft - subject to State Aid approval from Europe, small firms should be able to apply for these funds through participating banks in the normal way.
- A £1bn Business Finance Partnership scheme to raise non-bank finance for small and medium-sized Businesses. The government will begin the process of allocating funds early in 2012.
- Enterprise Finance Guarantee (EFG) will be extended from January 2012 to include businesses with up to £44m annual turnover.
- New Seed Enterprise Investment Scheme (SEIS) to be launched in April 2012, offering 50% income tax relief on investments, along with a Capital Gains Tax exemption on gains realised in 2012-13 and then invested through SEIS in the same year. In addition, the government will simplify and refocus the Enterprise Investment Scheme and Venture Capital Trusts.
- Small business rate relief holiday extended for a further six months from 1 October 2012. The Government will also give businesses the opportunity to defer 60 per cent of the increase in their 2012-13 business ratebills as a result of the RPI uprating, to be repaid equally across the following two years.
- Extend the R&D tax credit scheme to larger companies in 2013, subject to detailed consultation at Budget time next year. The existing SME R&D incentives will not be affected.
- An extra £1bn for the Regional Growth Fund for England between now and 2014-15, along with a range of infrastructure projects that will be devoted to improving transport and broadband internet services in the regions.
- Make 100% capital allowances available in the Black Country; Humber; Liverpool; North Eastern; Sheffield; and Tees Valley enterprise zones. Further extensions are planned to zones in the North East and a potential new zone around the Battersea power station in London.
- Bring forward employment law and health and safety reforms under consideration part of the Red Tape Challenge.
- More than £5bn additional spending promised for investments set out in the National Infrastructure Plan, backed by £20bn from UK pension funds.
As is often the case with spending announcements, the autumn statement jumbled up a raft of multi-billion pound commitments that have already been made with new announcements, along with sums like the infrastructure and bank guarantee commitments that will not involve direct government spending. The Chancellor vowed in his speech that all the extra spending can be funded through central government savings and a 1% cap on some public sector pay increases for the two years after the current freeze ends in 2013.
One unexpected savings measure that may affect some businesses and tax advisers was a draft regulation restricting tax relief on asset-backed pension contributions that will take effect immediately, in spite of being presented as a Finance Bill 2012 consultation. “This will save the Exchequer almost half a billion pounds a year,” the Chancellor said.
The measures set out today, he continued, “require no extra borrowing and provide no extra savings across the whole Spending Review period”.
“Over the next three years we will use these savings to fund capital investments in infrastructure, regional growth and education as well as help for young people to find work. Every pound spent in this way will be paid for by a pound saved permanently.”
Recapping his announcements, Osborne said they amounted to:
- Sticking to the deficit plan to keep interest rates as low as possible.
- Increasing the supply of credit and money to pass those low rates on to families and businesses.
- Rebalancing the economy with an active enterprise policy and new infrastructure.
- Help with the cost of living on fuel duty and rail fares.
However, businesses and their advisers were not convinced. In a poll of 150 people who took part in a live panel debate during the speech hosted by BusinessZone and AccountingWEB.co.uk, 64% thought that small businesss were unlikely to benefit from the Chancellor's credit easing measures. “Unless the government finds a new way of delivering loan schemes outside of the discredited banks money will never reach small business,” commented Jonathan Russell of UK200 Group firm Rees Russell.
- AccountingWEB live panel debate - reactions from expert commentators during the speech
- Treasury Autumn Statement page, including Autumn Statement document (3MB PDF)
- Consultation document: Employer-backed asset pension contributions
- Small firms to miss out on credit easing benefits, say entrepreneurs
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AccountingWEB’s Editor at large has been with the site since 1999, rising from news editor to editor in chief, global editor and head of insight. As a roving editor, he continues to investigate the profession's use of technology around the world. He devotes his spare time to technology history and an oddball collection of stringed instruments...