Saturday, March 26, 2011
REFLECTIONS ON THE BUDGET
The World’s first summit on the geospatial cyber-physical supply chain brought together leading scientists from some of the world's top universities to discuss key issues in this critically important area.
It was a fantastic event with professors from institutions such as MIT, Harvard University, Oxford University, University of Memphis, Boston University and the University of Central Florida creating an international masterclass of discussion and dialogue with other representatives from the United Nations, US Department of Defense, Northrop Grummann, Microsoft and IBM.
Needless to say, the outcome of the conference, apart from creating sixty new ambassadors for Wales, could create significant opportunities for the Welsh economy over the next few months.
As a result of spending time at this successful event, it was only yesterday that I finally got the chance to examine the effect of the Chancellor’s budget on the Welsh economy.
Given that George’s Osborne’s ability to make any major changes to spending or taxation was severely hampered by the requirement for reducing the large deficit run up by the previous Labour administration, it is worth noting some of the positive measures that could help the Welsh economy to grow during the next few years.
First of all, the decision to reduce the main rate of corporation tax to 26 per cent from April will be welcomed by many of the medium-sized and larger companies in Wales. However, I would like to see the Chancellor indicate that there will be a similar decrease to the small business rate as well during the next few years, given that we keep hearing from politicians that small businesses are the “backbone of the economy”
Many small businesses will be glad that this is a government that is finally tackling the mountains of regulations that bedevil entrepreneurs every year and are introducing a moratorium that will exempt micro-and start-up businesses from new domestic regulation for three years. Along with the move to drop existing proposals for specific regulations that would have cost business over £350 million, this is long overdue, especially as some surveys suggest that owner managers of smaller firms spend up to three days per week dealing with government bureaucracy.
With the Welsh Assembly Government looking to boost innovation across a number of technology-based sectors such as biosciences, advanced manufacturing and the creative industries, the increase in tax relief from 175% to 200%, with the aim to increase it further in 2012, could have a significant effect on businesses in these critical industries. Medical companies clustered around the Institute of Life Sciences in Swansea will also be boosted by proposed improvements and simplification to the regulation of medical research to shorten approval times for clinical trials.
Access to finance is key to developing the small firm sector in Wales and initiatives such as the Enterprise Investment Scheme are critical tools in enabling funding to be raised for businesses. It is therefore great news that not only is the income tax relief on the EIS being increased from 20 per cent to 30 per cent, but the amount that any individual can invest to gain this relief has also doubled.
Of course, some measures introduced by the Chancellor will apply only in England although the Assembly Government will be given the funding, under the Barnett formula, to do the same. The question, of course, is whether they will use that funding to make a real difference.
For example, will they follow the lead of the UK Government and develop enterprise zones with simplified planning rules, superfast broadband and tax breaks for businesses. Certainly many parts of the South Wales Valleys would benefit enormously from such a proposal and I urge the First Minister not to ignore the potential of this new policy out of political intransigence.
I also hope that the Welsh Assembly Government will extend the small business relief scheme as has happened in England, given that many small firms in Wales have been severely disadvantaged by having higher rates bills than Scotland or England during the last 12 years.
To me, the most radical proposal in the entire budget relates to the right for Northern Ireland to consult on reducing corporation tax below that of the UK, a result that is due to intense lobbying by the business community in Northern Ireland.
As Chairman of the Welsh Conservatives’ economic commission, I have already made the case that if Northern Ireland’s argument revolves around their poverty relative to the rest of the UK, then Wales, as the poorest of all the UK regions, should also be given the opportunity to consult on such changes.
Whilst all the other measures in the budget are clearly to be welcomed, that, to me, would be the most important decision that could be made by any Chancellor in modern times and would help transform the Welsh economy. Let us hope that at least one party will take up the call for this radical change during the forthcoming Assembly election.