Serious times call for serious measures. This is, as Gordon said, no time for a novice. While the Tories whinge from the sidelines (and what IS your plan, George Osbourne?), Alastair Darling unveiled the Pre-budget Report. A full Budget in all but name, and frankly more significant than any of those in the past decade, it exposed the philosophical distance between Labour and Conservatives for the first time in a long while. I really liked the themes, philosophy and detail of it. I remembered why I support Labour.
Of course, the 45p tax rate for earners over £150k warmed my socialist cockles. But two measures stand out for me as real boons for small business.
Reducing VAT to 15% isn’t likely to send consumers running to buy Christmas presents, even if the £12bn or so it means will be swilling round the 2009 economy is very welcome. But, as one small business owner pointed out to me yesterday, it’s good news for SMEs thinking about big spending. It’s a good whack off a big purchase of say £20k. Yes, you can claim that money back (if you’re VAT registered) but you do have to pay it in the first place and that can be a blow to cashflow. My friend said it was a ‘good enough reason’ to make that big purchase in 2009 rather than 2010. Job done.
Secondly, the willingness of HMRC to show flexibility to small businesses who are having difficulty paying their corporation and income tax, VAT and NI is significant and enormously welcome. The message is: pay salaries, creditors and suppliers first and strike a deal with the taxman about what you owe. Small businesses often exist with tight cashflows and even just a small buffer zone can prevent an SMB from going bust (especially when a bank has withdrawn an overdraft facility at short notice). We also know that when a small firm goes bust, it can very easily take others with it and that’s bad. The banks aren’t providing the slack, so the government is right to do so in times like this and I think this will make a big difference in 2009.
There’s a lot to digest in today’s announcements but, in the light of global difficulties, the goverment has made its position clear: we need to borrow now to stimulate the economy and avoid the worst in the next few years, some support is necessary for specific groups and sectors (including small businesses) and, yes, we’re going to pay for this borrowing in the (better) years to come. We all wish it hadn’t come to this (aside from the progressive 45p tax rate, which is long overdue) but here we are. And in the absence of any other substantive plan (and an awful loat of petty shouting from the Tories), I’m happy to have Brown and Darling at the tiller. Here’s hoping we have a fair wind behind us.
Photo credit: HM Treasury.