The Chancellor was keen to show the rest of the world that the British economy is a robust environment in which to launch and grow a business.
The small-business community will welcome the decision to cut the small company’s tax rate to 20%, as well as giving start-ups a £5,000 employers national insurance holiday on each of their first 10 employees.
However, despite winning support for their less onerous national insurance proposals during the election campaign, many believe the Conservative-led coalition hasn't gone far enough in reducing the burden for small businesess of what the Tories themselves labelled a "tax on jobs".
"We welcome moves to give a national insurance holiday to start-up firms, but are concerned that with 70% of firms operating below capacity, those businesses already trading will not be helped," says John Walker, national chairman of the Federation of Small Businesses (FSB). "We need to see a full reversal of NICs increases to fully offset the ‘tax on jobs' which the previous administration initiated.
However, the FSB said the VAT rise to 20% would hurt small enterprises in particular. "The increase in VAT to 20% will hurt small firms who will have to pass the increase on to their customers, unlike big business which can absorb the cost," says Walker.
As a retailer I'm sure that the VAT increase will be very damaging to sales
Gina Krupski, Pink Camellia founder
The Labour party had called for specific allowances for investment rather than a cut to the headline rate, which currently stands at 21%.
“As a retailer I'm sure that the VAT increase will be very damaging to sales,” says Gina Krupski of Pink Camellia, which sells ladies’ nightwear. “The retail sector has gone into a major downturn this year as we all are trying to save more and spend less.”
Every sector wants special protection from the government of course, but Krupski believes there were reasons to avoid a VAT rise beyond her own narrow interests. “With little manufacturing left in this country, as we would rather buy cheap products from abroad, and the financial sector taking a hammering, retail is pretty much all that's left.
“No doubt the new government will try to rebalance the economy, but this will take years. Meanwhile, we have to live with what we've got, so a VAT rise was disastrous.”
