The 2012 Budget – As Revealed In Leaks

Since early last week rumours have been circulating about what to expect from tomorrows budget. Luckily there have been a number of outlets who have predicted what to expect (or perhaps been given an insider’s leak) giving us a pretty good picture of what to expect from the budget.Image

MPs, civil servant and special advisors usually keep tight lipped when it comes to the budget.  As we’ve seen in years past, any leak can be treated as a scandal and can even result in a resignation or two. Yet the lead up to this year’s budget has been handled with an added care.  With two parties squabbling over the finite details, more special advisers and government staff have become involved than under a single-party government magnifying the chance of potential leaks. Speculation when it comes to the budget is nothing new, but never before have the media and various organisations had so many hard facts on policy announcements. So what do the leaks tell us?

  • Good news for small business owners and entrepreneurs; insider information reveals that SME’s are to be offered £20bn in low cost loans, a proposal supported by most major banks. Yet not all have signed up, with HSBC declining to join the likes of RBS and Lloyds, stating: “the cost of funding is already low enough”.
  • A timetable is expected to be put in place to see the 50p top tax rate drop down to 45p then eventually to 40p by 2014, (conveniently, just in time for the next election)despite polls showing a majority of the public wish to keep the top rate of tax. While initially LibDem governing partners where hostile to the idea, they now seem reigned to the tax change and have dropped opposition.  on the basis that it is replaced by other measures to ‘squeeze the rich’.
  • In return the Chancellor has stated he will move to clamp down on tax avoidance by high earners and big business, in particular those avoiding paying stamp duty. While the income tax threshold for all 23 million basic tax-rate payers and many higher earners, is expected to be raised to nearer the £10,000 mark. Osborne is likely to announce a large short-term increase, with plans to reach the £10,000 mark by April 2014, long before it was scheduled.
  • Taxpayers will be given a breakdown of where their tax money is going, from the NHS, to defence, to unemployment benefits.
  • Following a similar scheme for the film industry, high budget television drama is to be offered an estimated 20%-25% tax break for production companies to ensure filming remains in the UK.
  • In a radical move, the government is to pave the way for Royal Mail privatisation, taking on all the assets and liabilities of the Royal Mail’s pension fund and responsibility for paying postal workers’ pensions for decades to come. The pension fund, which has a shortfall of £9.5m, would make it impossible to attract a private sector buyer.
  • In a move which has alarmed some road users, private companies are to be invited to run motorways and dual-carriageways.  Controversial changes to planning laws are expected to go ahead, despite opposition in Westminster and from countryside organisations.
  • It is proposed that Sunday trading laws might be relaxed during the Olympic Games to take advantage of the influx of tourists in a bid to boost the economy. Unions and religious groups have been critical of making any move permanent.
  • Finally the government seems set to reaffirm its commitment to spending 0.7% GDP on international aid

All the predictions have yet to be confirmed by HM Treasury, we’ll have to wait until 12:30 today to see if these predictions have indeed been leaks. 

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Who needs a Dragon when you’ve got Crowdcube?

Ever dreamt of being a Dragon on Dragons’ Den or investing in a business idea? Well now anyone can. Every day thousands of people around the world are investing in a range of different products, campaigns, causes and ideas through crowdsourced funding websites.

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Many of these ‘crowdfunding’ sites, such as Kickstarter and Crowdfunder, focus on creative or social projects and are proving to be a game-changing mode of financial backing. One group that has particularly benefited is independent musicians. Music-loving investors are happy to help enable independent, up and coming artists they like to produce their music, often taking big record labels out of the equation and enabling listeners to connect directly with the artists.

UK-based Crowdcube, however, focuses solely on equity for new businesses and start-ups. Amounts as little as £10 can be invested, giving anyone a chance to participate. Last month Crowdcube released its first year profit growth report, demonstrating strong growth in 2011. Over £2,500,000 was invested throughout the year and the company set a world record in November as the first crowdsourcing website to raise £1million for bar operator The Rushmore Group.

There have been flutters of interest about crowdsourcing over the last couple of years but 2012 could well be the year that it actually goes big. A sure sign that it’s gaining mainstream importance and interest is the appointment of Jimmy Wales, co-founder of Wikipedia, as an advisor to the civil service in Whitehall. His role, as reported by Andrew Hough, will be to “help civil servants develop initiative new technology”. Involving ordinary people in government decisions fits nicely with the government’s Big Society programme and cuts agenda, but crowdsourcing’s biggest selling point is that is provides people with innovative business ideas the opportunity and platform to pitch to a wide range of potential investors. Ideas that would otherwise be ignored, rejected, or have failed in the past after following more conventional routes to sourcing investment.

Yet for every successfully funded project, there are a number that miss their target. Crowdcube’s report also shows that in its first year, for each project that succeeded, there were 13 that failed to achieve the necessary funding.  A successful crowdsourcing pitch requires a good deal of groundwork to create the necessary buzz and maintain investor relationships post-pitch, and not everyone will make the mark.

Crowdsourcing will also not work for every business as having such a large number of investors can lead to friction if projects do not go to plan. For example, after reaching its initial funding target, Vere Sandals, a US start-up wanting to build a sandal factory in New York, faced some major setbacks and as a result has experienced a barrage of investor frustration as dates and targets were missed or pushed back.

The government keeps telling us that entrepreneurs SMEs are the lifeblood of the UK, but with little subsequent support, and banks less open to parting with cash in the tough economic climate, sites like Crowdcube are using the democracy of the web to offer an alternative way to get businesses off the ground. Could Crowdcube be the first step to making the government’s vision a reality?

Either way, facilitating entrepreneurs to engage directly with investors and minimise the risk factor of starting up from scratch is a positive thing and should hopefully ensure good ideas are never ignored and even little projects can make big ripples.

 Keith Millar 

When did risk become a four letter word?

We’re constantly hearing how a big government, with all its thousands of employees, is looking to the private sector for inspiration and salvation. The common theme we keep hearing is how the private sector will bring the public sector out of doldrums. Look at the birth of StartUp Britain, a fantastic new initiative and a direct response from the private sector to the Government’s call for an ‘enterprise-led’ recovery.  And this isn’t just in the UK, the Obama administration is also a big fan of cheering on the entrepreneur. If you build it, they will come. C’mon c’mon, you can do it! You will do it! You HAVE to do it!

New businesses will lead the recovery, just as they have done in the past. Stop, rewind, play, repeat. And in the next downturn, second verse, same as the first.

If the government truly believes that ‘Made in Britain’, ‘Created in Britain’, Designed in Britain’ and ‘Invented in Britain’ will propel our nation forward, and if the Government believes that relying on SMEs and entrepreneurial businesses will provide jobs and growth – shouldn’t they do more to support would-be entrepreneurs and fledgling businesses? Don’t we all need to take a vacation from the health and safety mindsets?

We have become a society that is too often risk-averse. Almost every day the Daily Mail and other publications take delight in publicizing the latest health and safety court case. Not only does health and safety create red tape that makes running a business difficult, it also encourages a mind set of being more conservative (and there for risk averse). And the hope and dream of the start up is what makes the risk worth taking.

Let’s take a breath and remember the basics. There are lots of great ideas out there but only few become great and profitable businesses. Risk is part of the game. Government needs to allow for some risks. Because when it works, when the small idea becomes the next big thing, the sky really can be the limit for massive success. Only this time around, we need more than a few big things to pull us out.