Printers underwhelmed by Osborne's 'mixed-bag' Budget
Wednesday, March 28, 2012
In the presentation of the 2012 Budget, chancellor George Osborne last week made it clear that the government's spending plans must be "fiscally neutral", a term he has often used to describe the Budget he delivered in 2011.
And, once again, Osborne was tasked with stimulating growth without a great deal of money to do so – something that is not lost on BPIF public affairs advisor Andrew Brown. "Disappointed would be my reaction to the measures laid out this year. We needed a kick-start and we didn’t get one," he says. "While there were some relevant announcements made, you really have to dig deep to work out how print can benefit."
One potential high-point was the announcement of the National Loans Guarantee Scheme (NLGS), which is designed to enable government to provide guarantees against unsecured loans made by UK banks to businesses with a turnover of less than £50m.
Intended to pass on the benefit of the government’s low borrowing rate to UK business, it is expected to lead to a 1% reduction in the rate of interest charged.
Martin Lett Jnr, director of Kent-based Marstan Press, says that although the scheme is a positive step, the majority of SME printers would sooner have the banks "open their wallets" and catalyse investment in the process.
"If it was down to me, I would ensure that the banks are made to pass more of the money on. We need that more than a new guarantee scheme and it would help a greater number of companies invest and expand," he adds.
While Brown welcomes the NLGS, he says that feedback from members so far indicates that they view the scheme as something as a "short-term fix" that is more likely to benefit medium-sized businesses.
"What would be more beneficial to UK print would be an increased level of opportunities for businesses to access asset- or equity-based finance in order to promote growth," he says.
Brown’s scepticism is echoed by the Forum of Private Business (FPB), which welcomes the NLGS "in principle", but fears that smaller businesses will miss out.
It claims, like the BPIF, that the scheme will be of more assistance to medium-sized and larger businesses. Additionally, the FPB is also sceptical of the benefits for small businesses of the government’s Business Finance Partnership, which Osborne increased by 20% to £1bn.
The BPIF also says that the failure to cap business rate rises, which will increase this year to 5.6%, or increase capital allowances will compound the difficulties faced by small firms.
Mark Snee, managing director of Technoprint, agrees Osborne made a mistake by not cutting business rates. "Business rates are a huge disincentive to anyone wanting to start up a business when the cost of doing so is catastrophic," he says. "It is very well trying to spur on enterprise, but a huge mistake to ignore existing businesses and let them go to the wall."
Brown says that with a forecast 5.6% year-on-year fall in business investment in Q4 2011 coupled with SMEs struggling to invest in new equipment, action needs to be taken.
"Fiscal incentives are therefore needed to stimulate investment in the cutting-edge technologies required to deliver the innovation and productivity printing companies need to ensure competitiveness," he says. "We were disappointed that the chancellor failed to grasp the chance to put these vital incentives in place."
The decision to cut corporation tax from 26% to 24% from April, with a staggered reduction to 22% expected in two steps between 2012 and 2014, was welcomed by many – the BPIF described it as a positive in a "mixed-bag" Budget – but others remain unconvinced.
Snee says cutting corporation tax is unlikely to help small businesses in any major way, arguing that a reduction in National Insurance contributions would make more sense. "People would prefer to pay a tax on profits made rather than a taxes that you pay whether you have made a profit or not," he says.
This is a view shared by Marstan’s Lett, who adds: "What really would have made a difference would be have been to allow us cut the level of National Insurance contribution that we make. It’s essentially a tax on employment."
While the final impact has yet to be assessed, many in print are less than overwhelmed by this Budget.
"We had hoped for something bold and unfortunately, we didn’t get it. There was little damage done, but sadly there is little positive to write home about either," adds Brown.
- Advent of the National Loan Guarantee Scheme backed by Barclays, Lloyds, RBS, Santander and Aldermore
- Increase in the size of the Business Finance Partnership by 20% to £1bn
- Tax-free personal allowance to rise by £1,100 from April 2013 to £9,205. According to the government, this will make 24m people better off by £220 a year
- An immediate 1% cut in corporation tax, which will bring the level of tax down to 24% from April. Two further cuts will take place in 2013 and 2014, cutting corporation tax to 22%
- Consultation to begin on simplifying tax for small firms with a turnover of less than £77,000
- Creation of new enterprise areas in Dundee, Irvine and Nigg in Scotland as well as Deeside in Wales
- 3.02p per litre fuel duty increase will take effect from 1 August
Do you think this Budget will be good for your business?
Managing director, Pensord
"From an SME’s perspective, the 2% drop in corporation tax and the Loan Guarantee Scheme were the highlights. Maintaining 0% VAT on magazines and newspapers was also crucial. Not reducing fuel duty was a missed trick as this impacts everyone and is at a critical point. Perhaps more should be done to get young people interested in print and manufacturing, but the industry could do more itself. On a personal note, I’m just glad it’s not my job to balance the books. It’s always going to hurt someone."
Owner, Print Express London
"The chancellor was in a difficult situation as there was nothing to give away. His intention to help small businesses is welcome as has been recognised, we are the engines to help grow this economy and therefore its future. The changes to corporation tax although small, are appreciated so in that respect I am grateful. In the past, the government has borrowed to stimulate the economy, but we’re in debt crisis at this moment in time, which makes doing that difficult. So therefore, we should be grateful for any help we can get."
Director, Hollywood Monster
"For us, the main point of interest is the support for innovation through R&D tax credits. Many people may assume that those credits are only in place for companies that operate laboratories, but that’s not the case as businesses like ours can very much benefit. For instance, when developing a new sign display system, this requires prototyping for different applications and therefore research has to go in to this. We’re in-line for around a £40,000 return through this scheme in the past year so I would suggest others do the same."
You can read Forum of Private Business Policy advisor Robert Downes's comment here