The Autumn Statement saw George Osborne return to some tried and tested, but not entirely successful tools, says ACCA (the Association of Chartered Certified Accountants), whose members support Small and Medium Enterprises (SMEs) throughout the UK. With a grim economic outlook limiting his options, the Chancellor has focused on boosting enterprise, but some of the policies announced may not bring the benefits he hopes for.
'It's good news that the Chancellor is focusing on helping SMEs access finance,' says Manos Schizas, ACCA's senior policy advisor. 'However, some of the measures that he's announced should be viewed in the context of what has been seen to work so far. For instance, the plans for credit easing look like a cross between 2008's failed Working Capital Guarantee and the European Investment Bank guarantees, which have experienced very low uptake in the UK by European standards – and with a single bank accounting for two thirds of activity.
'Besides, the Chancellor's plan for credit easing hinges on the shaky assumption that the prospect of a government guaranteeon bank liabilities is not already priced in by bank bondholders. On top of this, the weak economic outlook is already dampening demand for finance, which is something credit easing won't address.'
ACCA also welcomes the Treasury's interest in medium-sized firms, as has been urged by some stakeholders, but the Treasury must remember it's not the 'M' in SMEs that counts, rather focusing on those businesses with significant growth prospects should matter more.
The Chancellor also announced plans to encourage private investment in public infrastructure projects. Gillian Fawcett, ACCA's head of public sector, says: 'This proposal needs to be looked at in detail and to be successful it would need to be very different from the government's previous experiments with Private Finance Initiatives. Too often these have not been value for money for taxpayers.'
ACCA takes a more positive view of some of the Chancellor's other policies, including the extension of the Small Business Rate Relief scheme, the income tax and capital gains relief for those investing in start-ups, and the angel investment matching plans.
Elsewhere, ACCA believes the Research & Development credits reform couldn't come soon enoughbut it needs to be implemented after consultation with its users to make sure the online option works for them. Meanwhile the 100 per cent Capital Allowances in Enterprise Zones would, of course, ideally be extended to all SMES even if only on a temporary basis. The abolition of low-value consignment relief is boost for the High Street, but online retailers might not find it too hard to find a work-around.
With public finances tight, the extension of existing schemes or the encouragement of private finance is the best the Chancellor can do.
The Chancellor needs to approach further rises in the bank levy with caution though, warns ACCA's head of tax Chas Roy-Chowdhury: 'The Government needs to be careful with bank levy. It's been quite successful so far, but the danger with politicians is that once they find a tool they like, they end up over-using it. It would be better to let the tax run for a period before playing around with changing the rates. Ironing out some of the loopholes though is a welcome move.'
Chas continues: 'It is also worrying that the Chancellor has chosen to further limit tax credits. This is the wrong timing for such a move as it could serve to further dampen the economy by taking income away from a comparatively ready-to-spend income group.'