April 22nd is a red letter day for businesses all over the country as Alistair Darling prepares to deliver what is being hailed as the most important budget in the past half a century.
With banks refusing to lend, cash flow being squeezed and export markets under pressure, business managers are holding their breath to see what measures the government will put in place to help UK plc.
The day after the budget smallbusinessadvice.tv will be broadcasting a Budget Special to help you understand what the Chancellor’s budget will mean for you, your clients and your staff.
It will be presented by Ian Collins, national radio presenter and a regular contributor on Sky News and the BBC. He will be joined by the Shadow Business Minister Mark Prisk MP, British Chambers of Commerce Director General, David Frost and James Norvill, MD of GD Environmental, winner of the Outstanding Business of the Year and the Green Award at the 2008 Chamber Awards, to assess whether this budget will deliver the necessary stimulus for an economic recovery.
If you have any questions for Ian, David, Mark or James, please e-mail them now via the box above and we’ll do our best to answer them during the especially extended live Budget Special.
For more information visit www.smallbusinessadvice.tv
H: Ian Collins, host
D: David Frost, British Chambers of Commerce
J: James Norvill, MD of GD Environmental
M: Mark Prisk, MP
H: Hello and welcome to www.smallbusinessadvice.tv brought to you by the British Chambers of Commerce and Dell in collaboration with Intel. I'm Ian Collins, this of course is our Budget Special, what's be billed as the most important budget in 50 years. Did Alistair Darling deliver for small businesses yesterday? Joining me to discuss all of this and review the budget is David Frost, the British Chambers of Commerce's Director General, and James Norvill, MD of GD Environmental, let's first of all cut to the chase, GD Environmental, we know about the Chamber of Commerce – what do you guys do and what is your business all about?
J: GD Environmental is a waste management company. We handle both dry waste and wet waste; we transport, treat and recycle dry waste, eliminating landfill
H: Ok. Now also we were due to have with us Mark Prisk, MP the Shadow Business Spokesperson but urgent common business took him away from us. But however we did have a chat to him a little earlier on and you'll hear what he had to say in a few moments' time as well. So first of all guys let's just get an overview of where we sat with the budget yesterday. David first of all – how did Alistair Darling do in the budget 2009?
D: Well he had enormous problems to deal with and he still has, and he had very little room to manoeuvre, with this huge public debt and borrowing that we've got. But against that backdrop I think there's an understanding from him about the central role of business driving this economy out of recession, and there are a number of measures in there – I think – that will help business.
H: Ok and James? Your thoughts?
J: Yes I think he's in a very awkward position there – he's done too little, too late. This should have happened a long time ago, we could see what was coming. Certainly a year ago, if not before
H: Let's hear then from Mark Prisk, MP – shadow business spokesperson who couldn't make it, but we did catch up with him a little earlier on. I started off by asking him whether he thought the Budget 2009 did enough for small business
Mark Prisk MP: I thought the Budget was deeply disappointing for small businesses. There was no help with business rates. No help, for example with small company corporation tax bills. And I think some of the measures that have been suggested haven't really been thought through. I mean it's welcome to see changes on the trade credit, because there are a lot of people who can't get credit, but the government scheme will only provide top-up covers, so that really means that if you can't get any cover, this scheme is of no help to you at all. So I think it's very disappointing. The government seem to have ignored small businesses almost entirely
H: So has the extension to loss carry back been enough to help those small businesses with cash flow?
M: It's good to see some kind of carry back in terms of losses, I'm not going to be churlish there, but my frustration is that cash flow is made up of a lot of issues, not least dealing with your fixed costs, so for example no help for the smallest employers with their payroll costs, very little help in terms of changes like corporation tax or indeed automatic small business rate relief. These are the things that help get costs down and enable businesses to run their cash flow. Didn't see any help on that at all
H: What has increasing the top rate from 45% to 50% for those earning over £150,000 – it's a big move, but is it the right move?
M: Well the books have to be balanced and we think that action does need to be taken this year to deal with that, but it should start with the spending ,rather than always – as Labour tend to – start with jacking up taxes left, right and centre. We would rather not have to put up taxes but we can't at this stage, given the state of the public finances say that this measure should be changed. It's not a measure we like but frankly given the way the government have left the finances, I suspect it's not something that we could reverse overnight
H: Well that was Mark Prisk, the Shadow Business Spokesperson – we'll be back with Mark a little later on to speak about the car scrappage scheme, amongst other things. The big headlines of course this morning, as regards what's happened in terms of the Budget, is that – that new tax rate guys, I mean this is huge news. It's symbolic as well as what it does in practical terms. James first of all – what do you feel about a country that now has a 50% tax rate? Unthinkable
J: I don't think it's a particularly shrewd move. These high earners, my concern would be that they'll look to earn their money off-shore. It seems great on paper, all these noughts and great figures, but where will the money actually end up? I think it's pushing it a little bit too far
H: Yes I mean a lot of indignation David from the newspapers this morning as you would imagine – it's red all over, that's rich, PM tears up new Labour script etc. Was it inevitable that we had – the money's got to be raised from somewhere, let's sting a few rich old duffers? That seems to be the sentiment here
D: No but I think this is a form of posturing. If it raised a significant amount of money you could understand, but you know the figures in the red book shows something under £2 billion will – well bear in mind we're going to be borrowing £175 billion next year. Doesn't make a difference, but what it does send is a – I don't think – a very positive message about the UK to be a place to do business
D: He said he wants to rebuild the city, you know as a global financial hub, well you're going to have to attract the best brains from around the world – are you going to do it if we've now got what will be one of the highest tax rates in Europe?
H: Well that's the problem James isn't it? Whilst it might bring in a few quid here and there, I mean it's not significant in the grander picture by all accounts, but it's what – it's the message it sends out really.
J: Yes of course
H: It tells the rest of the world this is a place where you will be taxed heavily if you are successful
J: Like David just said, why would you want to come to the UK and pay more tax when you can earn your money, like I said, off-shore? It's nonsensical
H: And of course you know the Conservatives, we heard there from Mark Prisk saying oh it's not the finest moment, are these guys likely to reverse this? It seems they're now caught and stuck with it if they succeed at the next election
D: Well I mean it's quite clear that there are different views within the Conservative Party, but whichever government is in power, come the middle of 2010 they have a huge financial mess to sort out, and they're going to be looking at every possible way to bring in income
H: What about for businesses, for small businesses specifically then? What jumped out at this budget James that made you think actually this really does look like this man understands the plight of small businesses? You guys have had a very difficult time over the last 12 months; there's not been a lot of sign of late that that's going to get better any time soon –
H: Was there anything he said yesterday?
J: Not particularly. One of the things that does jump out at me is the fuel increase. That directly affects my business, and it affects 100% of the UK.
H: What about corporation tax David, what were you expecting to hear there but didn't?
D: Well corporation tax – the government has made changes on that. I think the issue which we think is positive is about a couple of allowances yesterday. What is happening at the moment, there is no business confidence out there. Businesses are not investing. If for this short period there can be an incentive and capital allowances are increasing the threshold for that, enables companies to bring forward that investment, then we think that will be beneficial, and clearly again looking at the figures, the government is holding an enormous amount on store that this will happen
H: I went to a treasury briefing after this all happened yesterday, and I was listening to a head honcho one presumes from the civil service trying to explain what all these terms mean. There's a lot of financial business journalists listening to this, and we still get confused by what sort of phraseology is all about – tell me about credit insurance? What do they mean when they talk about credit insurance? What does it do and does it do all the right things for small businesses?
D: Well credit insurance essentially means that if I'm supplying, as a small business, by you as a large company, I can take insurance out that I'm going to get paid. Because clearly there are concerns at the moment that if businesses go down, that will have a huge impact on my own business, so you take insurance out. Now what's happened is you know that is being hit hard. We did a survey only last week, 27% of businesses are finding it harder than this time last year. 10% have had it withdrawn completely. The market has in a sense frozen up, so we think that this is a good measure. For the government to work with the insurance companies to somehow free this market up – it has got to work. We – in many ways – it's now a bigger problem for small businesses than actually getting bank finance. So an important measure, if it works
H: OK. The strategic investment fund – what are we to make of this and again for the small businessman what does it mean?
J: I don't' think it means a great deal. We had this conversation earlier today. If you're going to invest and move forward, I think your heart needs –
H: £750 million – it sounds like a lot of money
J: It certainly is. To the industry. I'd like to see it go on gassication plans. Pyrolysis. Heating new homes. A big problem with the country is expanding
J: What are we going to do with our waste? There's no plans for this. We're talking about wind turbines offshore, inshore – we still generate waste. As a country grows, we generate more waste. It's not being dealt with. This waste can be used to treat homes or generate more electric
H: I mean there's a bit of a battle isn't there between the parties as to who is the greenest, you know we've got the greater green edge, the Tories will say that, the Lib Dems will say that, and of course the Labour government will say x, y, z but it did seem a little thin on the ground from an environmental element. I mean he talked when he summed up about how this is a green budget that understands all the various pressures there are from the environmental argument, but did it in reality really hit in those areas?
D: Well there is a significant proportion – this strategic investment from the – aimed at the new green economy, and I think we've got to look at what it's aimed at. To get out of this recession it will be business that drives us. The public sector which has grown enormously over the last 10 years can no longer donate, will shrink. Financial services will be a lot smaller. It will be business that drives us out, but what we've got to ensure is that we have manufacturing in the new sectors, new technologies that are going to haul us out, and this strategic investment fund has the potential to do it. But what we don't want to do is go back to the idea that government can somehow pick winners. It never has been able to and it won't be able to in the future. But a fund there
H: Ok we'll have some questions in a couple of moment's time. We'll also be hearing back from Mark Prisk, the MP as well, we spoke with him a little earlier on. He is of course one of the shadow spokespeople for business. The car scrappage scheme which we'll get into in a second with Mark, I mean this was a huge headline grabber of course, £2000, cars over 10 years if you cash it in you'll get your nice, new car and somebody gave you £2000 to help you along the way. Is this a sound move to get the car industry going James?
J: I think the scheme and the concept is brilliant, but what we don't have in this country are cars being built, we don't manufacture. In my opinion that all comes back to the minimum wage – we can't afford to manufacture because minimum wage is too high. The manufacturing plants cost the same wherever in the world you put them, but our labour costs are too high. It will be nice to hear that you get your £2000 for your old car when buying British-built cars, but this just simply isn't going to happen
H: And David what about yourself? How do you feel in terms of this?
D: Well it's worked in Germany. It's been extraordinarily successful in Germany and also in France. And it's not going – someone is not going to trade-in a £2000 old, 10 year old Ford Fiesta and buy a £35,000 BMW. It's going to be one – it's going to be small cars that impact. But we've got to bear in mind that the global auto sector is – it has plants in every country, it is truly inter-connected so although the cars may not be produced here, we've got component suppliers who are supplying into countries into Germany, into France, into eastern Europe and if all these little fires are starting to be ignited in terms of a scrappage scheme here, a scrappage scheme in Germany, a stimulus package in China – hopefully this will suddenly ignite and the global economy will start to move again. So we think it's got – it has got potential. It's worked in Germany
H: Just before we go back to some questions, we've got loads coming in and we will get to those questions in a second. Let's go back to Mark Prisk, Shadow Business Spokesperson on these issues and first of all on that very point, about what's happening with the car scrappage scheme and of course that increase in petrol as well. Here's what Mark Prisk had to say –
M: I don't think this is going to save the automotive industry. Remember that 8 out of 10 cars bought in this country are made abroad, and while there will be some benefits, I notice that it's a short period. It's meant to start next month; it ends in March of next year. It's actually only a £1000 discount from government because they're trying to get the industry itself to pay. So I think they should have focused on the skilled jobs, I think they should have looked at business costs, like business rates. That's the kind of area they ought to be focusing on.
H: Would the Conservatives have done the same thing with fuel duty, increase it by 2p and then a further increase further down the line?
M: Well again you know we would far prefer the government said right let's balance the books, let's look at trying to cut the spending. And then look at whether they need to put up charges or taxes in due course. So again this is not something that we can at this stage we would instantly reverse because the public finances are in a truly awful state. I mean it's worth remembering these are the worst public balance figures, as it were, worst public borrowing figures, in peace time. It's a phrase I never thought, I never hoped I'd ever have to say, but that's where we are. So sadly again the price of Labour's incompetence, I think, is that we're all going to have to pay more.
H: We're all going to have to pay more says Mark Prisk the Shadow Business Spokesman. But of course if we believe the polls, the Conservatives would form the next government. Is it really going to be any different under these guys, because I mean they're inheriting a financial minefield? Can they reverse things like the additional rate in tax? Can they do anything more to alleviate the problem other than what the government have already done? David?
D: I think the scale of the public debt that is going to hit any government by next year will be – we owe enormous – the focus must be on raining in, cutting back to be quite frank, public expenditure. You know people are dancing round this subject, the bottom line we just can't go on spending as much as we are. The income that we're generating from a business stimulus package won't bridge that divide. So I think the focus will be on cutting expenditure and they'll be elements I think where the state will withdraw from. You know we can't just continue doing things that have been nice to do over the last ten years.
H: Ok here's a fairly radical suggestion, let's put this to you first of all James. This comes from Sean – "wasn't this a great chance to get rid of the minimum wage and help out those small businesses who really need help?" Pretty controversial stuff
J: No I don't think so at all, I think this was the time to make this happen. There's a lot of people unemployed that would happily work for £4.50 an hour, but we can't. We can't employ these people. Businesses can't succeed at employing them at the current minimum wage rates. To get people in employment and the money moving back round in circles, I think this needs to happen
H: I mean you say that there are lots of people that want to work for that money – are there really? Is there evidence that there are people that will work for £4 an hour but can't because the law says you can't
J: Well where I'm from in South Wales you've got very high unemployment, you look at the history of South Wales, mining, car manufacturing – it's gone. These were effectively minimum wage jobs when there wasn't a minimum wage. People will work, they want to work
H: And what about the British Chambers of Commerce, David – how do you sit with this argument? It was always a pretty hot potato because in principal it all looks rather good. Here's a minimum wage, we can't exploit workers and we're a first world economy and that's how we should deal with things. But as James has just said when there is a downside to this, you may find that people who want to work at a lower rate but you're not allowed to pay them that lower rate because the law says otherwise
D: Well we've pressed for a freeze. Our surveys are showing that just under 60% of companies are members, which are really the backbone of Britain – companies like James. They're actually freezing wages this year. Now if you increase the minimum wage at this time, what you're doing is narrowing differentials, and people at the bottom end who have got skills, who have got responsibility are suddenly going to say well why should I have that if now I'm being paid only a marginal amount, or even getting paid the same amount as someone on the minimum wage. So we think it's the right time to freeze it. But also we're saying there should be a moratorium on employment legislation – no more employment legislation for the next three years. Let businesses get on with the job of getting through this recession, creating wealth and creating jobs
H: What there seems to be is an awful lot of confusion about the budget and what it means in practical terms, some measures coming in straight away, some coming in in a year's time, two years time. An example of that confusion is here from Joseph, he says "with the economic effect of small and medium businesses – small and medium-scale businesses, there is no financial support guaranteed from the government for these businesses. Banks are creating more difficult credit concerns to deny funding small business. How will the government help on this?" I mean it's a very good question, we're hearing small businesses, in fact we're hearing just about everybody around the country, but in particular small businesses who are somewhat of a backbone of our economy, who need to get things moving but can't because the banks are doing very little to help
J: It's a massive problem and will they help or can they help? Personally I hear horror stories of businesses about to fail and then the banks withdraw their overdraft or reduce their overdraft, they increase their interest rates and it doesn't appear that the government wants to help. They're letting far too much slide away
H: And David from a point of view of the British Chambers of Commerce, I mean what sort of relationship do you have with the banking institutions?
D: Well there's been a lot of criticism from businesses –
H: I'm sure you're knocking on their door saying come on let's open here –
D: Unquestionably and what we're saying is to get through this we're going to need this tens of thousands of businesses that are going to still be surviving to get us out of it, and therefore the banks have got a responsibility to work with businesses. Now I think the government introduced this enterprise finance guarantee, it had a slow start; I think it is now starting to work. But we've got to keep our fingers on – the banks have got to help business and the government's got to keep the pressure on them to ensure they do it
H: Ok and what about that business of the Job Centre Plus? Explain what that is all about? I mean there's £1.7 billion funding for this – I mean is this a glorified youth training scheme? What does it mean in practical terms and will small businesses benefit from that?
D: The Job Centre Plus is going to become overwhelmed over the next few months. We're projecting unemployment will rise to 3.2 million in 2010. What we've got to do is to build much better links between small businesses and Job Centres Plus, and Job Centres Plus has got to become responsive to the needs of those employers. That has to happen
H: And James do you think small businesses are going to be queuing up to try to get people onto those schemes? Is it going to be a way of hiring people you didn't get your dream minimum wage scrapping scheme and this perhaps goes some way to alleviate that, if you've got cheaper labour, assisted by the government?
J: The concept is there like David just said I just don't know if they could cope with the enquiries and the requests of small businesses. I think it will be massive
H: And UKTI let's move onto that – UKTI explain David if you could – what do we mean when we say UKTI and what's the significance in terms of what happened yesterday with this extra £10 million for business – what does it mean?
D: UKTI is the arm of government that promotes inward investment and trade, boosts export, putting it simply. We believe that this recovery will have to be export-led. British business needs more support to actually get abroad, go and meet potential customers, invest in market research and therefore the £10 million doesn't sound a lot in overall terms, but it is a really good start to help boost export. More effort and more attention will be needed. We have to pay our way in the world, and we can't just sit back and import more and more and more, we've got to export more. This will help
H: With so many figures of billions and millions floating around the place, you're right, £10 million doesn't sound very much, in the grander scale of the kind of numbers he was talking about in the budget –
D: Well it used to be – was it Ronald Reagan said that you know a million here, a million there; you're soon talking serious money. Well now it's a hundred billion here and a hundred billion there, you know this is serious figures and they have to be tackled head-on sooner rather than later
H: And let's move on James if we could to this issue of businesses who are going to have to make people redundant – what was there within the budget that you felt addressed that? I mean they've talked about this minimum redundancy payment being increased by about £30 I think. What's the significance in practical terms of that?
J: Well first of all from an outside view, what a negative thing to increase. That tells me that more people are going to be made redundant and they're a collection for votes
H: Do you think that was a bit of a blunder then that they're almost admitting actually this problem is bigger than any of us previously thought?
J: Well first of all let's keep people employed. And next step let's get more people employed by whatever means necessary. Redundancy is not a positive thing; I think it's a very negative thing to bring up in the budget
H: And David, what did you make of this slight increase?
D: Well our concern was the trade unions were pressing to be raised to £500 a week, so yes it's gone up by a small amount. Yes there will be a cost on business. It could have been a lot, lot worse. But I absolutely agree with James, the bottom line is we don't want to see it. I mean – unemployment, redundancy, long-term unemployment is very, very dispiriting and I think you've got to therefore look at that connection with Job Centre Plus, how we help people back into the labour market as soon as possible. And again that links back to the point on minimum wage
H: When the Chancellor stood up at the dispatch box to deliver this – the mother of all budgets if you like – what was it you expected David? What did you think this man is certainly going to do this, this and this, but didn't. What were those elements that were missing from Alistair Darling's budget 2009?
D: I think the two things – one I would like to have seen much greater attention paid by him to tackling public expenditure. I just think that you're £15 billion of efficiency savings; well there are efficiency savings that could have been made anyway. We have to tackle everyday expenditure. And I think the other thing, I feel very strongly about is that whilst you're – not the tax relief on pension contributions – in the private sector – public sector pensions are not being tackled. This is a huge liability, a growing liability. We cannot continue to afford to pay the public sector pensions in the way they are now. He should have announced them and should have tackled it
H: And James what do you feel looking at that yesterday? Was there missing elements that you were shouting at your TV screens saying "come on Chancellor, say it? You can do it" – but he didn't
J: Like we've already said I think we've missed a great opportunity with minimum wage – either freeze it, reduce it, remove it. Also fuel is a big disappointment for me. Again bit of a desperate move I think. It really does affect everyone.
H: What has happened there on that point? I was talking to some Americans just earlier in the week and they were saying actually fuel's come down in price in the United States
J: But tax is going up
H: Why is it that our taxation on fuel on the duties is so vast and continues to be so?
J: I'd love to know! And to understand because you know the common denominator is that everybody needs fuel
J: Whether you've got a car or not, your food gets delivered by road or rail, all of which use fuel
H: And just a final word from you David, how tricky in the next 12 months will it be for small businesses? Scale of 1-10 if you like?
D: I mean it's 7 / 8. We believe that this huge recession, this steepness that we've had since the autumn is now starting to bottom out. It will not be easy. Business needs every help that it can get from organisations such as our own, from government, from the banks, I'm optimistic about the future but it's not going to be easy
H: And James final point on that?
J: Yes I don't think we're plummeting in the way that we have. We have hit rock bottom, so to speak, but it's not going to return as quickly as Alistair Darling is anticipating
J: It's not that easy
H: Ok. Listen gentlemen thanks for being with us today, good to see you both and we'll see you again very soon. That is all we've got time for on the Budget special, we hope you've enjoyed it. And if you'd like to get some help on the issues faced by your business then make sure you go to the website, your first port of call at www.smallbusinessadvice.tv – our next show will be on Thursday May 7th at noon, and on the subject of finance and cash flow, so make sure you join us for that. In the meantime from me, Ian Collins, goodbye