Plans to stimulate private-sector growth beyond the affluent south-east have drawn criticism from the Federation of Small Businesses (FSB).
In a bid to offset the damage caused by spending cuts to job prospects in regions heavily dependent on the public sector, Chancellor George Osborne announced a package of measures to boost private enterprise outside of London and the south-east in yesterday’s budget.
But plans to offer small business start-ups in areas such as the North-East and Wales a £5,000 tax break on national insurance contributions for each of the first 10 people they employ, says the FSB, would lead to an exodus of investment and jobs from the south. Many south-east-based entrepreneurs would be prompted to relocate up north, it claims.
"A more uniform approach would have been preferred," it said in a statement. And it added that it was "regrettable" that only start-up operations could take advantage of the scheme.
A more uniform approach would have been preferred
FSB airs misgivings about NIC tax allowance granted to businesses outside of the south-east
Mike Cherry, who runs a timber products operation in the Midlands, agrees: "Firms already up and running that want to diversify or expand will be unable to exploit the initiative. That's a pity."
Cameron’s Conservatives have struggled to repair the party's image in the north of England, but sought to further distance themselves from the Thatcherite approach to austerity cuts yesterday, despite the fact that the current budget deficit necessitates more severe cuts than even the Iron Lady had to countenance.
George Osborne even accused Labour of presiding over a rise in private sector employment centred overwhelmingly in the south. For every private-sector job generated in the North and Midlands between 1998 and 2008, said the Chancellor yesterday, 10 were created in London and the surrounding regions.
As well as tax incentives offered to the north, several regional infrastructure projects escaped the axe, including the upgrade of the Tyne & Wear Metro, the extension of the Manchester Metrolink, the redevelopment of Birmingham New Street station, and improvements to the rail lines to Sheffield and between Liverpool and Leeds.
The FSB also expressed concern that next year's VAT increase to 20% would hit small businesses disproportionately as larger firms can "easily afford to absorb the increase".
Lee Mowle, CEO of garden products retailer The Stewart Company, fears the VAT hike for two reasons: “We are experiencing record highs on material prices and need to increase our costs. Add a VAT increase and we have a serious impact on RRPs.
“The second factor is retailer pressure to maintain their margins and existing RRPs so the supplier is likely to have to bear the VAT increase themselves, which would hit margins that are already being dragged down.”
