A budget for entrepreneurs?

For whoever wins the next UK general election, the key economic question will be how to harness the potential of the entrepreneurial sector so that it fuels sustainable growth.  Entrepreneurs have seen their turnovers fall in the last two years by as much as 19%, have tightened up their business models so as to retain workers ready for the moment when the market picks up and have held back on long term investments while access to credit remains uncertain.  As a result, demand for finance is weak and growth cannot be relied upon.

The 2010 budget was an opportunity to acknowledge these pressures and to provide a metaphorical security blanket to the country's beleagured SMEs.  By providing relief from business rates for a year and by doubling the annual investment tax relief to £100,000, the Chancellor of the Exchequer will hope he has done just this.  He also doubled the Capital Gains Tax relief for entrepreneurs to £2m providing an incentive for them to realise and reinvest the wealth they have created in their businesses.

But he was also drawing a clear line between the political parties.  Effectively he was saying that the economy is recovering, recovery is fragile so any immediate tightening will be damaging, and that the government wants to facilitate growth in the economy by providing a springboard for businesses rather than by doing their work for them.  To paraphrase his words, "the Government can't build engines, but can help to provide the infrastructures that allow the private sector to build engines."

Much of the budget was rhetorical.  There were token amounts allocated for renewable energies and clean tech, help for the creative industries and life sciences, and some money to help broaden the skills base, particularly in science, technology, engineering and maths subjects at university.  These have been on the government's wish list for a long time and while they remain under-resourced, the chances of the UK retaining its leadership role in science, innovation and technology are debatable.  The US and Germany, for example, have increased their spending on these vital areas, even during the recession.

Even so, the Chancellor has to be given credit for a budget which had to toe the very thin line between saying something that would upset the markets and doing something that would damage real growth.  Given the point we are at in the electoral cycle, it was better to be neutral and this he certainly was.