Member Article

How should SMEs respond to the Budget

How should SMEs respond to the Budget?

George Osborne’s Budget of 18th March can be viewed in many ways: as a pre-election pitch, as a genuine attempt to address the country’s problems as an attempt to wrong foot opponents or as a glorified PR stunt for the Coalition. Whatever your view, the fact remains that businesses carry on surviving and/or thriving despite rather than because of the acts of politicians. And some will fail even though some of the Budget’s measures are designed to stimulate growth and competitiveness. Having said that, perhaps one of the more interesting aspects of this year’s Budget is that a very large proportion of the changes made directly affect individuals rather than businesses: the increase in personal allowances, a new Personal Savings Allowance, the Help-to-Buy ISA and more flexibility with ISAs and Annuities. Oh, and cutting beer duty! Equally some of the changes are very specific and therefore unlikely to benefit the vast majority of SMEs: changes that make it easier for charities to claim gift-aid, increasing the bank levy, providing postgraduate research loans, further investment in science and innovation, action to help farmers, and a plan to introduce tax relief for local newspapers. Then there are changes that could well benefit SMEs: cancelling a planned fuel duty increase, committing resources to faster broadband (though that will depend on where you are), increased support for the oil and gas sector – and therefore their supply chains, and even abolishing the annual tax return. Finally, there are steps to give more support to the UK regions in general and the north of England in particular, which might or might not help local firms, depending on how engaged they get individually with the process. It sounds good for the Chancellor to establish new Enterprise Zones designed to create growth and jobs, but the effectiveness of similar initiatives in the past has been patchy to say the least, whatever the claims might have been.

Where does that leave the independent businesses that make up a large proportion of the UK economy? Well, in my view nothing changes: entrepreneurs will continue to establish and develop companies with varying degrees of success, and those that get it right will thrive. Perhaps that is the most interesting aspect of Government economic policies because whatever they do, there will be firms that survive and those that fail, so perhaps Budgets don’t actually do much the encourage the creation of wealth; what they do is attempt to produce a generally level playing field on which competitors can compete and survivors can survive? In the meantime, representative bodies of all sorts, from local authorities to Chambers of Commerce and from small sector based trade associations to the likes of the Confederation of British Industry and Federation of Small Businesses will continue (quite rightly) to pester Government with varying degrees of success to reduce the burden of regulation and to facilitate fair competition. State hand-outs (however they might be dressed up) are not the panacea that some seem to think. They artificially distort the market and their inevitable withdrawal quite often causes more damage than the circumstances that justified their introduction in the first place.

It has always been my view that Government should stay out of business and should let businesses get on with their job – doing the best they can to grow by meeting customers’ needs and then rewarding their staff accordingly. Government should then allow people to keep as much of their earnings as possible and be allowed to spend their own money as they see fit. Yes, there has to be methods that raise the required funds for public spending, so taxation of some form is inevitable, but it must be proportionate and efficient. Sadly it must also involve politicians.

This was posted in Bdaily's Members' News section by Geoff Dunning Limited .