Kate's Comment

Thoughts on British ICT, energy & environment, cloud computing and security from Memset's MD

Response to the chancellor’s 2012 Autumn statement

Following yesterday’s Autumn statement here are my thoughts and responses.

Corporation tax going down to 21% in April 2013

Obviously I welcome the reduction in corpration tax. As a fast growing business we re-invest most of our profit after tax into accelerating our business growth, so if we are taxed less we grow faster and recruit people more quickly.

Incidentally, The Register recently did an excellent article explaining why businesses should not pay taxes – people should.

£1bn extra capital for Business Bank

There is a desperate need for expansion capital among SMEs. We have struggled to gain access to debt-based finance in recent years despite being an extremely successful business. Particularly disappointing was the Green Investment Bank – one of our hopes since we are investing in some great green innovations – who seem quite incapable of interfacing with SMEs. By contrast the Business Growth Fund (BGF) have been very accessible and I think this new Business Bank could do worse than to learn from them. That said, our preference would be for pure debt-based finance rather than equity based (the BGF usually want a slice of equity too); at present the banks doggedly insist on us – the entrepreneurs – providing personal guarantees, which my brother and I are unwilling to do (we already risk so much running a small business, we don’t want to risk our homes too). We will be keeping a close eye on what Vince Cable has to say on this in the coming weeks.

£600m for scientific research

The continued investment in scientific research is very welcome. We now work closely with Surrey University and this has yielded some excellent fruits such as substantial improvements in our energy efficiency. However, universities are extremely strapped for cash at present and there is a diminishing focus on novel research.

Ultra-fast broadband expansion in 12 cities

Ultra-fast broadband is absolutely essential for us to maintain our position as an ICT leader and to be honest I’m a little dissappointed with this. The high-tech sector is Britain’s greatest hope for future growth but it needs a foundation in the form of a super-fast broadband network for consumers to be able to fulfil that promise. Given ICT’s importance to UK PLC I would have hoped for a more significant commitment.

Tax relief on the largest pensions will be reduced from 2014-15.

The lifetime allowance will be reduced from £1.5m to £1.25m and the annual allowance from £50,000 to £40,000

Personally I don’t see this as a huge issue. My peer group and I had parents who were battered by the pensions failure around the turn of the century and most of us prefer to use investment in our homes or ISAs for savings rather than pensions.

ISA contribution limit to be raised to £11,520 from next April

This is welcome. My expectation is that pensions will go increasingly out of fashion among young, affluent people like me, but we need a tax-free vehicle to replace it which affords the flexibility we desire. ISAs are the obvious choice.

Growth forecasts downgraded

Growth predicted to be -0.1% in 2012, down from 0.8% predicted in the Budget. Forecasts for next few years are: 1.2% in 2013, 2% in 2014, 2.3% 2015, 2.7% in 2016 and 2.8% in 2017

It is disappointing that growth continues to be poor and that we are not making headway against the deficit. However, I do have faith that the Government’s plan is the right one and that they have been victims of circumstance with the double-dip recession and wider global economic forces. I hope the Chancellor will keep his mettle and stick to his plan as he has suggested – it remains our best hope for a return to decent growth and reducing our national debt.

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