Brooksonís reaction to the 2009 Budget

Martin Hesketh, MD of Brookson Ltd, one of the leading providers of accountancy, tax advice and other support services to self employed professionals, gives his reaction to Alistair Darlingís 2009 Budget:

ìFrom a recruitment industry perspective, Mr Darlingís 2009 Budget was a bit of a mixed bag. It provided some new financial support for job creation in particular industry sectors and specific sections of the workforce, both of which are helpful. It also provided some useful business support via measures covering corporate taxes but it failed to reverse the proposed removal of the staff hire VAT concession and delay further the small companies corporation tax rate increase - both of which will impact a number of recruitment businesses. Additionally, the Budget also highlighted the Governmentís lack of appreciation for the contribution that the flexible workforce makes to the overall economy, with no specific measures to support this critical population which underpins the recruitment industry.

ìDespite active lobbying from the industry, the Chancellor did not backtrack on his decision to withdraw the staff hire VAT concession. The withdrawal was implemented earlier this month on the 5th April, and was met with an outcry from the industry. While this move, or lack thereof, was not unexpected, it is somewhat unhelpful for those industries that the decision specifically affects, primarily finance, healthcare, education, charity and public sectors.

ìEmployment businesses and agencies may also feel the impact of the proposed higher rate; 50 per cent income tax band for those earning over 150,000 per year. This may significantly impact the availability of the ìtop talentî for both permanent and temporary roles.

ìThere was, however, a clear focus from the Chancellor on increasing investment to help job creation, which may subsequently help the recruitment industry. The Government has guaranteed a job or training for all under 25s who have been out of work for a year, as well as promising an extra 1.73 billion of funding to the Job Centre Plus network.

ìLooking at the bigger picture there may be some indirect support for specialist agencies with investment and projected growth in the housebuilding, off-shore power generation, energy efficiency and digital network sectors. Alongside this, a promise of extra traineeships in the care sector could increase public interest in joining the industry.

ìAgencies may also be relieved to see that no new legislation is being proposed around the different ways of working of contractors. This should ensure HMRC simply presses on with proper enforcement of the existing compliance framework.

ìThere is little to shout about for small companies, with the proposed increase of 1 per cent in the small companies corporation tax rate not being scrapped as called for, although the concession to allow those companies struggling with cash flow to reclaim tax from the last three years has thankfully been extended.

ìAt a macro level, the Chancellor certainly seems to have had one eye on the election with this Budget. He has provided small amounts of support for specific categories of those on low incomes and proposed significant tax rises, particularly for the high earners, and public spending cuts in the years ahead after the next election.

ìOn the whole, Mr Darlingís forecasting abilities must be brought into question with this Budget. Only five months ago the Pre-Budget Report indicated a predicted economic deficit for 2009/2010 of 120bn - today the Chancellor admitted that the UK is facing one of 175bn – the largest UK shortfall since World War Two.

ìFurthermore, and even more worryingly, the Chancellor predicts that the books will be balanced in the medium term but makes this prediction based on a growth rate of 1.75% in 2010/2011 and growth rates s of 3.5 per cent from 2011/2012 onwards. This again could well be an over-optimistic view of the current economic environment. Letís all hope he is right!î