News Analysis: A Budget for business?

It was titled "Budget 2010 - Securing the recovery". The Conservatives described it as empty and lacking in vision while the Liberal Democrats said that it was full of insubstantial waffle. Now the dust has begun to settle, what did the broking community think about the Budget's proposed business measures?

The most relevant news for brokers came in the announcement on insurance premium tax legislation. The amendment, in force from 24 March, means that administration and arrangement fees charged by brokers for individually rated products including conventional motor and household insurances should fall outside the IPT net.

Grant Ellis, chairman at Broker Network, commented: "It has clarified and narrowed the scope of IPT and is a victory for common sense. I take my hat off to the British Insurance Brokers' Association, the Institute of Insurance Brokers and the Association of British Insurers. It is a good example of all the industry pushing together: the changes suggested would have been a logistical nightmare."

United

Ellis' was a sentiment supported by Ann Peel, head of technical services at the Institute of Insurance: "There is no doubt that, without our [combined] intervention, brokers would have been forced to disclose their fees on personal lines business to insurers.

"In turn, the insurers would have had the extraordinary task of accounting for tax on professional fees over which they had no control."

Graham Coates, chief trading officer at Bluefin, thought it was a fairly dull budget, designed not to upset too many people in the run up to the general election. He was, however, pleased by Alistair Darling's announcement that the 10% band of capital gains tax relief for entrepreneurs would be increased from £1m to £2m.

Coates said: "The doubling of CGT relief for entrepreneurs could encourage more selling, which is good news for brokers such as ourselves on the acquisition trail because it should make it easier to do the deals."

During his speech, Chancellor Alistair Darling, who has since been cheered by an upwards revision of growth in gross domestic product for the fourth quarter of 2009 to 0.4%, announced that legally binding commitments had been signed by RBS and Lloyds to lend £94bn to business over the next year.

Ellis welcomed the news but admitted that he remains to be convinced: "The sentiment is right but they'll continue to pay lip service unless there is a complete change in attitude. Whether they'll actually start to lend remains to be seen."

Rates change

Another element designed to support small businesses was a temporary increase in the level of small business rate relief in England.

The Chancellor announced that, from 1 October 2010, any eligible business occupying premises with a rateable value of up to £6,000 would pay no business rates for one year with tapering relief to £12,000.

Coates noted: "The vast majority of our revenue comes from so-called small and medium-sized enterprises, so we're pleased to see more cash available for lending and a cut in business rates will make their lives a little easier. As usual, of course, it looks like a case of giving with one hand and taking away with another."

The mixed sentiment was seen in two polls released shortly after the Budget. A poll of over 1,000 business leaders by the Institute of Directors found that 45% thought the Budget would damage the economy whereas 55% believed it to be neutral or positive.

In a survey of its members, the Forum of Private Business found that just 5% believe Alistair Darling's proposals will create an environment for their businesses to develop.

Perhaps most revealingly, 70% of respondents said they expect a more realistic budget to be delivered after the general election.

It was a point taken up by the Centre for Economics and Business Research, which stated that the Budget failed to address the fundamental question of how the record public sector deficit will be brought under control.

Ben Read, managing economist at Cebr, commented: "Our forecasts suggest that at least a further £35bn of spending cuts and tax rises will need to be found to meet the Chancellor's relatively modest aim of getting the deficit down to a still-unsustainable four per cent of GDP by 2014-15."

With good news on IPT and mixed news for business, brokers could be forgiven for being indifferent to this year's Budget. With a general election to be announced after the House of Commons' break, the next budget will set the true agenda for the next parliament.