The Westcountry economy has been traditionally dominated by owner managed business and the region has depended on successful entrepreneurship in good times and by dogged resilience when things aren’t going so well.

There are many factors which impact on business performance and lots of these are outside of individual control.  Few saw the credit crunch looming and the subsequent recession but most felt it.

So when the first Budget of a new Government is scheduled within 50 days of the election against a backdrop of having to reduce the biggest National Debt on record, businesses could be forgiven for wondering if they would again be a soft target for filling the Treasury’s coffers.

Business confidence is a delicate but powerful commodity and there was every danger it being severely dented if the Chancellor had failed to recognize the needs of the business community and got his spending cuts and tax rises ratios out of kilter with the need to support enterprise.

There are those who believe that stringent spending cuts when the country is still vulnerable to recession is the wrong course, while others fully support the “tough but fair” measures introduced in last week’s Budget – and these two groups are unlikely to be reconciled with only one being capable of being proved right in the course of time.

However, what the Chancellor did achieve with his approach to business was to bolster confidence and provide a degree of stability and certainty for the corporate sector to plan for the future.

For many, the rise in VAT is a tough call but we had seen it coming.  Lowering it to 15% didn’t make a lot of difference and raising it to 20% puts the UK on a par with most of Europe.  The downsides are a cooling of consumer confidence and rising unemployment.  A rise in VAT will also harm specific sectors including tourism.

However, the progressive decrease in Corporation Tax to 24% over the course of the Parliament and down to 20% immediately for smaller enterprises is a real recognition that UK businesses are a major part of growing the country out of debt.

Typical Westcountry owner managed businesses and family run farm operations may well benefit significantly from the increase in Entrepreneur’s Relief which has also provided considerable latitude for positive tax planning.

The £5,000 NICs holiday for each of the first ten employees hired by new employers is also good news for the South West although the Chancellor’s failure to reverse Labour’s proposed 1% hike in NIC from next year didn’t go completely unnoticed although he may yet review this come next Budget.

Another welcome nod towards providing stability and greater certainty has come in the Government’s recognition that its dealing with tax avoidance is a shambles.  It is now committing to making fewer ‘case by case’ and piecemeal changes ensuring greater  consultation to ensure that responses to avoidance issues and changes are both more considered and properly targeted.

We all acknowledge that George Osborne had a difficult job with his first Budget but, at first glance, it certainly has the flavour of being pro-business amid the public spending carnage he feels forced into – and he is not the first Chancellor to be horrified at the level of borrowing.

In 1860, the very same despatch box Osborne carried into Parliament last week, was first used for William Ewart Gladstone’s Budget where he had inherited an unpleasant financial situation, with a deficit of nearly £5 million and income tax at 5d (c.2p). He actually raised most of the money needed by raising income tax to 9d (c. 3.5p) famously saying, "In time of peace nothing but dire necessity should induce us to borrow".

Plus ca change

Francis Clark has offices in Exeter, Plymouth, Salisbury, Taunton, Tavistock, Torquay and Truro. Francis Clark is the winner of the ‘Auditor of the Year - Mid Tier’ in the National Financial Directors’ Excellence Awards 2011, and LexisNexis Best General Tax Practice Award 2009. More information is available by logging on at our Online Information Centre