Pledging not to repeat the mistakes of the past (when recession led to depression), Darling forecast that the British economy would contract by 3.5 per cent this year although “because of our underlying strength, and the measures we are taking domestically and internationally, I expect to see growth result towards the end of the year”. Darling predicted growth of 1.25 per cent in 2010 and growth of 3.5 per cent in 2011.
However, the Budget revealed that worrying levels of government debt. Public sector net borrowing will be £175bn or 12. 4 per cent of GDP. It will be 11.9 per cent of GDP next year, 9.1 per cent in 2011-12, 7.2 per cent and 5.5 per cent in 2013-14.
Darling added: “UK net debt, which includes the cost of stabilising the banking system, will, as a share of GDP, increase from 59 per cent this year, to 68 per cent next, 74 per cent in 2011-12, 78 per cent and 79 per cent in 2013-14.”
Rhodri Ferrier, the co-founder of natural men’s grooming brand Bulldog, says the figures are terrifying: “We’re saddling ourselves with so much debt, paying it off with high tax increases over the next three years.”
The few initiatives for SMEs and entrepreneurs contained in the Budget were a continuation of the option for businesses to defer their tax bill and an extension of the provision for loss-making companies to reclaim taxes on profits made in the last three years.
Darling said: “This help, which will lead on average to repayments worth £4,000 each year, will now be available for two years until November 2010. Well over 100,000 businesses will have their full current losses wiped out.
“And today I can also announce additional targeted support for companies’ cash-flow, with a top-up trade credit insurance scheme. This will match private sector trade credit insurance provision if insurers reduce their cover to any business operating in the UK.”
Ferrier is disappointed more wasn’t announced for small businesses and entrepreneurs. “What we’d like to have seen is practical help – a reduction in employers’ National Insurance contributions. There was no practical help to keep employee costs down,” he says. “I would have also liked more help for small businesses exporting our way out of the country’s problems or more cash that we could access.”
A measure that could impact entrepreneurs is the 50 per cent tax increase on those earning more than £150,000 and a reduction of tax relief on pension savings for high earners.
David Rose, chief executive of Growthwire, says the government has ignored the impact this will have on wealth creation.
Non-business highlights• £1.7bn of funding for people who have lost their jobs• Extra support for those under the age of 25, who have been out of work for 12 months• More places for students• Further mortgage help for homeowners who have lost their job• Incentives to allow smaller fields in North Sea to be explored• £50m to accelerate the modernisation of army housing• £500m of extra financial support to kick-start building on housing projects• More regulation for banks• £2.5bn for businesses to invest in industries such as advance manufacturing, creative industries and low-carbon economies• £5bn of efficiency savings in 2010-11, on top of a total of £30bn• Alcohol duties up by 2 percent tonight. 2 per cent increase in tobacco from 6pm• £435m extra support for energy-efficient measures• £535m of new support over two years for offshore wind, funding through renewables obligation• Child tax element will increase by £20. Disabled children to get an extra £100/yr; £200/yr for those who are severely disabled.• Pension support for grandparents• Statutory redundancy pay increase from £350 to £380 a week• Basic state pension will be increased by at least 2.5 per cent