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Over the last few days the deficit, housing and beer-related aspects of the Budget have been scrutinised in detail.
However the Budget, as always, includes plenty of interesting details beyond the headlines. A number of Budget announcements on state-funded business support give an indication of how the Government hopes to boost private sector growth.
As well as the controversial corporation tax rate cut and the National Insurance allowance tax break, the Budget introduced several other tax relief schemes that target Small and Medium sized Enterprises (SMEs):
In addition, the new £30 million Growth Voucher programme will help SMEs get advice on issues such as accessing finance and taking on employees. The extension of the Small Business Research Initiative (SBRI), a scheme that uses procurement tools to engage SMEs in research projects, could open up new growth opportunities. The potential effectiveness of the individual schemes can be debated, but a clear focus on the needs of SMEs is welcome.
Although there appeared to be new measures in the Budget supporting exporters, the majority, including additional funding for UK Trade and Industry (UKTI), were re-announced from the 2012 Budget. The Budget also included several announcements that could be seen as the beginnings of the Government’s much-debated industrial strategy, such asthe allocation of £1.6 billion to develop strategies for 11 growth sectors; and support for aerospace, digital media production and asset management industries.
Finally, several announcements were made about the Business Bank. It was confirmed that the Bank will start operating this year, and will deliver benefits to SMEs by the end of 2014. £300 million of the £1 billion allocated to the Bank last year will support non-banking lending tools and £70 million more will be used to expand existing business lending schemes. Unfortunately nothing was said about the way the Business Bank will be organised nor about the powers it will be given, which remain a mystery.
Next week we will publish a briefing that will focus on the complexity of the current business support system. Luckily for us, but unfortunately for the economy, the Budget did not make this problem any less relevant. Budget announcements on support for SMEs and exporters are no bad thing in themselves, but a more fundamental reorganisation of the services Government provides to the private sector is needed. The lack of clarity on how the Business Bank will operate, and the announcement of new sectoral policies, only increase the complexity of the business support landscape. Our forthcoming briefing analyses the current system, and shows why this increasing complexity is a cause for concern.
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