Budget 2010: Darling reveals £2.5bn business boost

CHANCELLOR Alistair Darling unveiled his “budget for recovery” today as he sought to persuade voters the economy is safe in Labour’s hands with a General Election just weeks away.

With the Government heavily in debt –  borrowing is forecast to hit £850bn this year – a budget full off pre-election sweeteners was never likely, but there was still room for at least one populist measure with the cut of stamp duty on properties worth less than £250,000 for first time buyers.

Mr Darling will pay for the cut by hiking stamp duty on £1m homes.
Details on how public spending will be cut was scant, but Mr Darling revealed a £2.5bn investment package for businesses to promote investment and job creation.

This will be partially paid for by the windfall tax on bankers’ bonuses, which was announced in the Pre-Budget report last autumn, and has so far raised £2bn for Treasury coffers.

Daniel Hartland, tax partner at Grant Thornton in Birmigham said: “Whilst we have still to work through the detail behind the Chancellor’s speech, it is clear that, as expected, this was very much a pre-election budget. 

“That said, there were a number of welcome measures such as the stamp duty holiday for first time buyers and various measures to assist SMEs, including access to finance and enhanced allowances for capital expenditure.”

The Chancellor announced that the two rescued banks – RBS and Lloyds – had agreed to make a further £94bn in business loans.

For credit-starved small businesses, the Chancellor said a new Credit Adjudication Service will be created, which will give firms the right to appeal if they are turned down for a loan or overdraft.
A £2bn green investment bank to help fund offshore wind schemes and new nuclear projects was also revealed.

Mr Darling downgraded his 2011 growth forecasts to 3% from 3.5% but also revised down his borrowing forecasts from £178bn to £167bn this year.
As expected, the planned 3p increase in fuel duty was scaled back – much to the relief of motorists and the haulage sector – and the rise will instead be staggered over the next 10 months with a 1p going on duty in April, October and next January.

There was a freeze on all income tax bands this year, which effectively means people will to pay more tax on their earnings.
 
Every higher-rate taxpayer earning more than £43,875 will pay an additional £489 in tax as a result of the move, and 75,000 more will pay this higher-rate tax for the first time.

The income tax grab comes on top of the new 50p higher rate of income tax which will come into effect next month for those earning more than £150,000.

Mr Hartland said: “As we move away from the fiscal stimulus and towards the pre-announced tax raising measures such as the freezing of personal allowances and the increases in income tax and National Insurance, there still remains, however, significant uncertainty regarding the potential for further tax rises in any post election budget and how such measures will be targeted.”