Would you mind saving the economy Darling?

This was the Budget to save the UK economy, but Alistair Darling looked anything but the man delivering the plan to save us all from financial ruin.
Indeed, when he sat down after delivering his pre Budget report he looked like a man in pain as shadow chancellor George Osborne laid into his economic survival plan.
Indeed, Osborn was a man energised by the whole destructive potential of answering Darling’s speech. Darling had the air of someone fatigued padding through his speech to get it over with. Osborne, by contrast, looked gleeful.
He should have done. After all, Osborne had ample time to prepare his attack given that the PBR measures had been widely trailed during the weekend and last week. Darling has lost the element of surprise some time ago, whether his fault or others, and as a result his speech lacked impact.
All told, according to the PBR Green Book, Darling was injecting £20bn into the economy over the next couple of years (he must be praying the crisis doesn’t last any longer) before beginning to claw back what he gave away through rises in national insurance contributions and what was termed £10bn worth of additional value for money savings.
But if I were a business man tonight, especially a small businessman, I am not sure I would be convinced by the plan.
The biggest trail was the expected cut in VAT from 17.5 to 15% amounting to a £12bn give away over two years. But already the concerns have appeared about the costs of administering a change that has to take place from 1 December.
Then there’s the £1bn from deferring the rise in small business corporation tax and the changes to income shifting. Nice, but these are deferrals of measures that have not been implemented. Businessmen are likely to feel that these measures simply leave them where they always were – square one.
Loss carry back also looks unimpressive. You can carry your losses back three years now instead of one – where it was ten years ago- but only up to £50,000. Not very much at all and a good sized SME might easily lose more than that in a single year. There’s easily more could have been done there.
On the positive side, it looks like Darling has instructed HMRC to go a little easier in demanding payment of tax bills (although the detail of that arrangement is still to emerge) and there’s a bit of a boost when it comes to excise duty on cars and vans.
But the nightmare on the horizon is implementing a hike in employers’ and employees’ national insurance contributions, starting 2010-11. This will cost employers, not only in contributions, but in the adjustments to IT that will be necessary to administer the whole thing. The software industry will no doubt start work on the new expensive toys that businesses will need to buy to handle the whole thing.
But if you add to the national insurance measures changes in allowances and the tax rise for those earning £150,000 or more then you have a whole slew of measures designed to put a spanner in the works of your payroll systems.
The whole thing could end up feeling like a huge burden for employers because they’ll even have to collect the rise in NI contributions for individuals too. In the end they may not feel very much like they are being saved, more like they are being asked to do the saving.
The fact remains, despite all of Darling’s machinations in the PBR, unless the banks start lending money again and improving business cash flow, none of this will matter. The recession will prove every bit as nasty as the worst predictions have it. And Darling did little in the PBR to force banks into lending. there was a little praise for Royal Bank of Scotland and its statement on freezing the cost of business overdrafts, but that’s as far as pressure on banks went. For now at least, the efforts to get banks lending more remains something of a tepid PR battle. Small businessmen would be forgiven for wondering how that will help them get through the coming storm.
Darling will tour the news rooms tomorrow trying to tell his story. The big question will be whether the fiscal injection is big enough, and how big a problem will it leave us with in the near future. Darling will have to convince everyone that the costs that come later are worth it to save us from ruin now. And all of that could prove a very hard sell indeed. There will be a lot of scepticism out there.Did