SEEDA: UK Budget Summary 201025 March 2010
The Chancellor has delivered a fiscally neutral budget , which he stated would provide targeted support to businesses, households and vulnerable individuals, while supporting future growth and a sustained economic recovery.
The Chancellor outlined the Government’s view on the state of the economy and public finances over the short to medium term. He expects:
- The UK economy to expand by between 1% and 1.5% this year. The Chancellor stated that the economy contracted by around 6% over the course of the recession and, as predicted in the PBR, GDP growth returned in the final quarter of 2009. GDP growth for 2011 was marginally revised down, to between 3% and 3.5%.
- Government borrowing figures have been revised downwards. Projected government borrowing for this year has been revised from £178bn in PBR to £167bn. The Chancellor expects government borrowing to fall to £163bn in 2010/11 and £131bn in 2011/12bn before falling to £74bn in 2014/15.
- The UK deficit will reach 11.8% of national income this year before falling to 5.2% by 2014/15 and the total UK debt is projected to increase from 57% of GDP this year to 75% in 2014/15.
- Consumer Price Inflation (CPI) to fall back to target by the end of this year. CPI inflation has remained above the target in early 2010. Inflation is expected to drop to 2 per cent by the end of 2010 and then to fall further through the first half of 2011, as the negative output gap continues to exert downward pressure on prices.
The Budget included a £2.5bn one-off growth package – to prioritise innovation, infrastructure and skills. This switches spend from existing allocations.
Measures aimed at helping businesses:
- To increase the threshold of the Annual Investment Allowance (AIA) to £100,000 for expenditure incurred from April 2010. To allow capital expenditure in a given year to be fully offset against taxable profits, acting as an incentive to increase business investment.
- To increase the proportion of central Government contracts to SMEs by 15 per cent across government, up to an extra £15 billion of business and providing direct support through the use of the free-to-use training package Winning the Contract.
- Access to Bank Lending – to allow SMEs who have been refused credit to appeal to a newly created Small Business Credit Adjudicator to ensure viable SMEs have access to the finance they need. This will work closely with the Financial Intermediary Service (delivered by Business Link). Business Link through FIS will be the sole source of referral to the adjudicator.
- Enhanced Online Service for SMEs – HMRC are planning to further reduce the burdens of starting a business and personalise online support it provides by the end on 2011. It will:
- Personalise business link.gov for those starting a business and enhance online services for all SMEs
- Help start-ups and new employers introduce a single interactive form to enable businesses to register for multiple taxes online and to authorise tax agents; and
- Provide an online facility that reduces the need for businesses, or their agents, to provide the same information to HMRC multiple times and allows them a single online view of current tax liabilities or repayments due.
- Entrepreneurs’ Relief supports business owners and those investing in businesses with growth potential by providing an effective 10 per cent Capital Gains Tax rate on qualifying disposals. The Budget announced an extension of Entrepreneurs’ Relief from the first £1 million to the first £2 million of gains made over a lifetime. This change will take effect from 6 April 2010.
- Building on a range of policies already in place to support the UK's innovative industries, the 2009 Pre-Budget Report announced the introduction of a Patent Box, applying a 10 per cent corporation tax rate to income from patents from April 2013.
- The announcement of a one-off funding of £270m in 2010-11, through a University Modernisation Fund. This will create 20,000 more university places, largely in key subjects such as science, technology, engineering and maths, starting in September this year. This aligns well with SEEDA’s recently published Regional Skills Priorities Statement, which highlights the importance of higher skills for R&D, innovation and the adoption of new technologies and the need to increase workforce STEM skills.
- UK Finance for Growth (UKFG), will be responsible for overseeing the Government's stock of over £4 billion of SME finance products, including the already announced Growth Capital Fund. It will work in partnership with the BIS, DECC and RDAs to co-ordinate public equity SME finance schemes. In the South East region the funds invested in are under the management of Finance South East.
- All government departments will pay 80% of invoices within five working days.
Measures aimed at supporting infrastructure development:
- To support investment in infrastructure in cities and other centres of growth through an Accelerated Development Zone (ADZ) pilot programme. Pilot schemes will be introduced in combined and selected local authorities across England in 2011-12 and will receive capital grant funding to a total of £120 million.
Measures aimed at promoting science, technology and innovation:
- £30 million of funding for the Institute of Web Science, a joint venture between Southampton and Oxford Universities.
- To implement £10m additional for infrastructure development (up from £50m announced in the PBR), to meet the needs of offshore wind turbine manufacturers looking to locate new facilities in the UK. The wind energy industry employs around 13,100 people in the South East.
- To introduce a tax relief for the UK's video games industry. This measure will have a considerable positive impact on one of SEEDA’s priority sector.
Measures aimed at improving higher education and skills:
- £25 million University Enterprise Capital Fund to provide early stage funding for the commercialisation of university innovation.
- £270 million Modernisation Fund, which will be made available to universities in 2010-11 to deliver efficiencies over the next four years, and fund an extra 20,000 undergraduate places in 2010-11.
- Extended the measure announced in PBR that aims at helping 18-24 year old Job Seeker Allowance claimants get back into employment or training after six months.
Support for the low carbon sectors:
- To give businesses a joined-up range of finance support to take Low-Carbon Technologies from concept to commercialisation, the Chancellor announced the launch of UK Finance for Growth (UKFG), which will oversee the Government’s stock of over £4bn SME finance products, including the Growth Capital Fund. UKFG will streamline and simplify the Government’s support for business, and provide a strong channel for private sector investment into SME-focused funds.
- UKFG will work in partnership with the Department of Energy and Climate Change and Regional Development Agencies to coordinate all public low-carbon SME equity schemes – including the £170 million stock of low-carbon finance products under the Carbon Trust’s venture capital activities and the UK Innovation Investment Fund’s (UKIIF) low-carbon programmes.
- To support the financing of low-carbon investment and new low-carbon jobs, the Chancellor announced a Green Investment Bank controlling £2bn of equity which will focus on investing in greener, cleaner energy and transport/infrastructure (i.e. low-carbon sector). £1bn will come from the asset sales (including the Channel Tunnel rail link), with the rest matched by private investment.
- Infrastructure UK will publish a consultation on the establishment of the Green Investment Bank in the summer. It is likely that the Green Investment Bank will focus initially on offshore wind electricity generation.
- Up to £60 million for the development of port sites, to meet the needs of offshore wind turbine manufacturers looking to locate new facilities in the UK, and secure low carbon manufacturing jobs. The Government will launch a competition to identify host locations for, and recipients of, this funding, subject to state aid approval.
- To update the technologies included in the Enhanced Capital Allowances scheme - ‘self-driving’ magnetic motors and biomass air heaters. Aim is to create new markets.
Measures aimed at reforming and restructuring the regional tier:
- Government will simplify the regional tier and reduce duplication of functions by co-locating the RDAs, Homes and Communities Agency and Government Offices, saving £255 million from 2012-13.
- To better align investment in growth there will be an enhanced role for Regional Ministers to promote growth and inclusion and champion public service reform. The Regional Funding Allocation process will be aligned with the Spending Review cycle, and Regional Ministers will recommend flexing funding to meet regional priorities as they emerge.
- A regional growth fund will be established by the Regional Development Agences (RDAs) within their capital budgets for 2011-12, to promote high-value investment in support of regional and national growth and industrial policy.