Labour and Alistair Darling have a lot to prove today. It is a near impossible balancing act. On the one side, you have the international markets that are bankrolling the government as borrowing spirals out of control; on the other the electorate suffering the longest recession since the 1930s.
The headlines today predicted an attack on bankers' bonuses but UK businesses will be hoping for something more substantial and measures that will provide real assistance in the form of increased lending and reduced red tape and tax burdens.
Darling must show the markets that he has a plan to reduce debt and maintain Britain's creditworthiness through its ability to repay loans without resorting to inflationary measures; the Tories believe this is the priority.
However, indications are that Darling favours a Keynesian policy of maintaining government investment and fiscal support for consumers and businesses so as not to cut short the frail and heavily supported recovery. What we do not need today is an election pitch, blind to the realities of the current crisis we are still facing.
Thank you to our panel of experts today who will give their thoughts during the PBR. They are:
Marcus Clifford, BPIF McInnes Corporate Finance
Paul Holohan, Richmond Capital Partners
Nicholas Mockett, Moorgate Capital
REFRESH FOR UPDATES
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12:20 Ten minutes to go, Gordon Brown draws the battle lines saying it is too early to withdraw government support
12:30 Darling stands up to deliver the pre-Budget report: "A critical time for the country and economy."
12:31 "Task to ensure recovery and long term growth." Aims to half the deficit over the next four years. "Choice is to reduce deficit without hindering recovery."
First mention of "fairer society"
12:33 Darling points to signs of global recovery
12:34 "I am confident the UK economy will start growing by the end of the year"
"To cut support now could wreck the economy."
Says VAT cut "countered the impact on business of the global credit squeeze" but will return to 17.5% in 2010 as planned.
12:35 Time to Pay scheme for businesses to be extended to "for as long as it is needed"
Marcus Clifford, BPIF McInnes Corporate Finance: good news on vat as no other hike in short to medium term as might have been expected
Nicholas Mockett, Moorgate Capital: Extending time to pay tax looks like a good move by allowing companies to keep trading and therefore helps mitigate the unemployment growth – but in reality companies are reporting more aggressive moves from HRMC.
12:36 Corporation tax rise of 1p delayed to provide help for small businesses
12:41 Darling says that unemployment has increased by much less than forecast. A short term unemployment is not turning into a lifetime on benefits as happened in the recessions of the early eighties and nineties.
12:42 Training guarantee for people under 24 brought forward
Marcus Clifford, BPIF McInnes Corporate Finance: heard no mention on helping sme's with capital raising or cashflow yet....
12:45 Lots of emphasis on government action helping to keep unemployment down throughout the recession.
Nicholas Mockett, Moorgate Capital: Boasting about unemployment being lower than many had predicted probably isn’t taking account of the numbers of people who are working less than a full week and suffering lower pay as a consequence.
12:45 Darling confirms basic state pension to rise by 2.5% from April next year.
Child benefit disability also to rise by 1.5% in April 2010.
Marcus Clifford, BPIF McInnes Corporate Finance: AD mentions making a difference...business owners still await in the intro what difference he will make for them... those who have faced the direct brunt of the recession
12:48 UK economic forecast downgraded to -4.75% over the year as a whole. Growth of between 1-1.5% predicted for 2010. Growth of around 3.5% predicted in 2011 and 2012.
Growth driven by exports, "determined to support growth"
Marcus Clifford, BPIF McInnes Corporate Finance: he keeps mentioning key industries where investment will be helped...we are a large and important sector
Paul Holohan, Richmond Capital Partners: Positive news on Q4 growth, but highly optimistic at 3.5% growth
12:49 Tax revenues have fallen as a result of the economy. The UK financial sector, which provided over ¼ of all tax receipts has suffered heavily. Initial £50bn estimate of taxpayer losses through government intervention downgraded to £10bn loss.
Marcus Clifford, BPIF McInnes Corporate Finance: on the tax front as so many owners have invested in their own businesses he ought to be looking at making equity raising tax deductible for smes
12:50 Forecast for borrowing £178bn falling to £176bn next year - that is £3bn worse than thought previously
Darling points out correctly that debt in UK is lower than many other countries as a share of GDP. Will "be in line with the average" at its peak.
Paul Holohan, Richmond Capital Partners: Extension of time to pay on tax repayment is a good thing
Nicholas Mockett, Moorgate Capital: With 25% of tax take historically coming from the financial services industry, which is still in poor health and is being hit by arguments over remuneration and financial services businesses leaving London (eg for Switzerland) in the face of rising taxes, combined with other lower tax takes eg from stamp duty, it will be interesting to see how the government can spend the way out of recession and still reduce the deficit by half in 4 years.
12:54 Plans to encourage growth in the future to achieve government’s defecit reduction plan: Business need access to credit – total bank loans to businesses today are above where they were when the crisis hits, Darling says.
12:55 Very aware that SME’s have difficulty getting loans – need to work with banks to make sure SMEs get the credit they need to fuel growth
12:55 Enterprise Finance Guarantee extended for a further 12 months. This means a £500m growth fund for small businesses.
Marcus Clifford, BPIF McInnes Corporate Finance: access to credit tables seem at variance with evidence from CBI and other research...... smes have not had access to credit and evidence from banks is finance will be tight... the current scheme is not working and just extending it without a fundamental review is wrong. an independent review on access to finance ought to be set up
Paul Holohan, Richmond Capital Partners: SME's difficulty in getting credit. Nothing specific announced on how this will be resolved - a missed opportunity to alleviate this.
12:56 After the brief aside on business lending, Darling is now onto the green economy.
Marcus Clifford, BPIF McInnes Corporate Finance: no mention on helping payment terms that affects so may businesses and one of biggest cashflow problems. business owners need more tangible help and not much of this so far
12:58 Electric cars will be exempt from company car tax for first 5 years? Car scrappage scheme extended to inefficient home boilers.
12:59 Apprenticeships have doubles since 97 says Darling. Financial support for up to 10k undergraduates from low-income backgrounds to take up short-term internships
13:00 50p tax on landlines touted in the Digital Britain report has been confirmed
One for the high-tec inkjet manufacturers out in Cambridge perhaps: a new lower 10% corporation tax for profits derived from patents
Also, high-tec industries to benefit from a £100m strategic investment fund
Nicholas Mockett, Moorgate Capital: Banks are lending but very little and predominantly to existing customers and those who are low risk. If the £500m fund is not excessively bureaucratic it could be a lifleline to SMEs.
Marcus Clifford, BPIF McInnes Corporate Finance: we will have to get our thinking cap on and see what patents the sector can develop as a result of 10% tax on profits derived from patents?
13:01 Tough decision on tax coming up. Here we go. "Fairness" second mention...and on to the banks
13:04 Banks: introduce from today a one-off levy of 50% on any bonus over £25k that the bank will have to pay, not the staff. Very interesting,
13:05 Darling freezes individual inheritance tax allowance at £325,000 until 2011.
Nicholas Mockett, Moorgate Capital: The 50% tax banks will have to pay on bonuses above £25k, regardless of whether or not they have received state support, is likely to lead to a further exodus of financial services businesses and may not help the tax take in the medium to long term.
The biggest cheer of the pre-budget report so far came for the announcement – midway through – that Bingo duty will fall from 22% to 20% in April
Marcus Clifford, BPIF McInnes Corporate Finance: no surprises so far and very political path being weaved and a chance to target areas that are easy pickings...but no real and tangible help for smes so far...business owners have got used to being self reliant and it seems like this is to continue
13:09 Darling says it is dangerous to reduce spending too soon so has decided to stick to spending plans for next year. Total public spending will increase by £31bn next year.
These decisions, says Darling, are taken from a position of strength – a remark that is predictably met with strong jeers from the Tory backbench
£5bn of savings from scaling back on government spending projects
Paul Holohan, Richmond Capital Partners: Nothing yet on reduction of red tape and people are at breaking point
13:12 Over half of additional revenues raised from bonuses and inheritance tax will be paid for by the top 2% of earners, Darling claims
13:15 Darling takes a moment to praise the UK’s troops and announces a further £2.5bn next year towards military operations in Afghanistan and £5bn from the strategic investment fund to help ex-servicemen and women who want to set up their own businesses
13:16 National Insurance to be increased by a further 0.5p from April 2010 although no-one on under £20k a year will have to pay more. This measure is to fund spending increases on frontline services, such as schools, health and police
Marcus Clifford, BPIF McInnes Corporate Finance: NI still a tax on employment at a time when unemployment will be high. The incentive to take on staff is not there and most business across will not be looking at additional employment
13:18 Darling closes with the statement that the government has helped support businesses and families through the recession and that it has led by example with policies that have been followed across the world though opposed by some in this house. He adds that the key task is to secure the recovery and provide a springboard for long-term growth. We have a choice, says the Chancellor, between ambition and austerity driven by an outdated dogma.
Osbourne wastes no time in answering and opens with the quip that We were promised a pre-budget report and what we got was a pre-election report
The government, he says, has adhered to the greatest of golden rules never trust a labout government with your money again.
Darling’s report seems to have given the Tories plenty of ammo. Labour has quadrupled the national debt in office, says Osbourne, before accussing the PM of inflicting upon the British public the deepest and longest recession in our history.
That's the end of our live coverage, check back later for full analysis of the PBR and what it means for your business
