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Chancellor fails to secure long term health of economy

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24th Mar 2010
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The UK economy is very sick. The chancellor has done just enough to stablise the patient, but has laid out very little in the way of more long-term care, argues UK200 Group president Colin Howe.

 Overspending and unwise borrowing has produced the double shock of a recessionary ‘heart attack’ and money supply ‘blood clot’ and while the chancellor has done just enough to stem the negative effects for now, there is a more serious long-term health risk to the economy that’s not been addressed yet.

While there were a lot of individual measures aimed at helping small businesses in the Budget, the big problem is that the chancellor still hasn’t really spelled out how he’s going to fund the reductions in the deficit. It was clear that the government was trying to preserve the goodwill of the business community.

The doubling of the Entrepreneur’s Relief lifetime threshold to £2 million appears to have taken all commentators by surprise but may well precede an increase in the full rate of CGT post election. The 12 month reduction in business rates for smaller businesses is also most welcome.

Forecasts for reducing the public sector borrowing requirement were more bullish than in the past even though his growth forecasts have been trimmed back slightly. This implies that the borrowing reduction will largely be achieved by spending cuts – what we still don’t know in detail is where or how as this is presumably too politically sensitive!

The announcement of a new Investment Corporation (UK Finance for Growth)  to oversee the £4billion SME finance products sounds good in principle but may just be the reshuffling of existing quangos into another body.
The major disappointment for both businesses and individuals is the failure to reverse the intended 1% National Insurance rises due in 2011.

 

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