Alistair Darling has delivered a politically minded budget aimed at boosting start-up technology and innovation businesses and curbing earnings of the wealthy with targeted taxes.
In an ideal scenario, the chancellor would likely have used this budget — which comes just weeks before the general election — as a chance to earn easy political points through grand giveaways across sectors.
Yet with record levels of public-sector borrowing, Darling was forced into revealing a relatively meagre £2.5bn one-off growth package with a loose remit for supporting small businesses, innovation creation and investment in national infrastructure and skills.
The chancellor also announced a new body to oversee the government’s £4bn range of finance support for business. Within this, he put in place a new Growth Capital Fund aimed at pumping much-needed private capital into fast-growing companies.
Some of the budget’s larger initiatives were notably tinged with green, which was welcome news to many environmental groups. Darling highlighted a new Green Investment Bank that will control £2bn worth of funds for investment in green transport and sustainable energy, in particular offshore wind power — an area where the UK is already outpacing the rest of the world.
Darling also announced the government would be offering £60m to develop ports looking to host manufacturers of offshore wind turbines.
Gordon Edge, RenewableUK director of economics and markets, said this is welcome news for the offshore industry, as his group had lobbied before the budget for the creation of manufacturing ‘super hubs’ around strategically positioned UK ports.
The offer of £60m is a fair amount, he added, but he will be eager to read the fine print to determine whether these funds are actually newly allocated.
Edge said he is also pleased to see the development of a Green Investment Bank, but he cautions its funding is slightly tenuous considering £1bn of the funds will be derived from yet-to-be-sold assets such as the Channel Tunnel rail link. It is proposed the rest will be matched by private investment.
Darling also used the budget as a platform for building up future skills resources. The chancellor announced the government would be providing an extra one-off funding of £270m in 2010-11, through a University Modernisation Fund.
‘This will enable them to create 20,000 more university places, largely in key subjects like science, technology, engineering and maths, starting in September this year,’ he said.
Even with the extra burdens these new students could pose on universities, Darling curiously made no indication there would be any extra investment in academia this year. ‘Given this unprecedented rise in investment and the need to tighten public spending overall, universities must make efficiency savings while focusing their funds rigorously on quality teaching and research.
The budget did, however, set forth a £35m university enterprise capital fund to provide direct support for university innovation and spin-out companies.
Budget 2010: reaction round-up
‘The Green Investment Bank is a welcome step forward but, in reality, by simply announcing its intention to consult later in the year on establishing the bank, the government has made little more than a tentative step forward, at a time when huge strides are needed. We should be leading the world in attracting investment in high growth environmental industries, not simply consulting on it.’
Danny Stevens, policy director of The Environmental Industries Commission (EIC).
‘A £2bn Green Investment Bank is certainly a good start – we have been calling for new thinking on how to unlock the long term sources of funding needed to finance infrastructure for some time. However, as Infrastructure UK has acknowledged, the UK will need to invest £40-50bn per annum in infrastructure, so with a starting fund of only £2bn clearly there is some way to go.
Tom Foulkes, director general, Institution of Civil Engineers (ICE).
‘The green economy will generate one million jobs in the UK and a market size of £46 billion within a few years. The new fund (Green Investment Bank), alongside better use of Government spending power, positions this sector at the heart of a rebalanced economy’.
Jonathan Kestenbaum, chief executive, NESTA.
‘The raft of business measures for small to medium-sized business is largely a re-branded offering of existing support, and is unlikely to promote a significant increase in R&D and innovation by businesses. The £35m being made available as part of the university enterprise capital fund is unlikely to turn heads, as the institutions look to deal with the £400m cut-backs they face.’
Dave Croston, partner and patent attorney at Withers & Rogers LLP.
‘Successive governments have failed British SME innovation and manufacturing through lack of investment and support. The £2bn green fund and the other various incentives for SMEs is a start, but we need a much wider range of green inventives that go beyond pure funding, to other financial initiatives, tax breaks and employment support.’
Omer Kutluoglu, CEO, 2K Manufacturing.