A dream budget


As the coalition government prepares its emergency budget, Peter Savage looks at what is planned and tells us what he thinks the government should do.
Apologies to avid readers of this column that there wasn’t one in the last issue. The editors decided on an article on the effects of the general election on our industries and, sod’s law, the deadline fell on the day it was announced that Nick Clegg was in talks with both Labour and Conservatives – in those heady five days when we had no government.
Since then, the Lib-Con coalition has been confirmed but the clarity and certainty that businesses crave still seems distant. While the effects of the coalition on hot button issues like welfare, education and the economy command column inches on a daily basis, the question on most of our minds - as TV-Bay readers - is how will it impact the media industry and on small businesses in our industry??
For starters, both the Conservatives and the Lib Dems have expressed their commitment to a strong and independent BBC - so “hooray!” for that. However, straitened economic times and looming public sector cuts means that the prospect of increased government investment in the broadcast industry looks to be quite some way off.
But what of the proposed new tax regime? What effect will that have on you and I?
Encouraging investment
The proposed budget on 22nd June will increase the tax burden on higher earners – so the small number of people in the industry who earn over £150,000 will not get the tax reduction expected of a new Conservative government. There are also rumours that the top rate tax allowance on pension payments will be reduced as well as the high rate Enterprise Investment Scheme (EIS) allowances and the like might also be lowered.
“So what?!” you all cry. “They all earn too much money anyway!” But, instead of focusing on their incomes, it’s worth considering what they do with their spare cash. The effect of these seemingly unfair tax policies could indirectly have a huge impact on investment in our industry.
Take, for instance, pension and EIS type investments. These are tax avoidance schemes and some, such as those based around film finance, have had quite a bit of press coverage recently. Indeed, it has been suggested that most of the top footballers have invested in film finance schemes as part of their tax planning. If the allowances are reduced from 40% or 50% down to 20%, say, then the incentive for them to put their money into such schemes is reduced and … yes, that reduces the amount of money in the pot for investment in films. Less money in films, fewer films made – and the implications are clear.
Some better news is that the corporation tax rate is expected to come down. This will be good for small businesses that currently pay 28% tax on profits over £300,000. A reduced tax burden on them (hopefully) means more money for them to invest in their businesses and the industry.
Incentivising businesses
Interesting as these aspects may be, the media has been focused on changes to capital gains tax (CGT). For non-business assets (such as second homes or personal share portfolios) CGT is likely to increase to bring it closer to personal income tax rates. Business assets include shares a person holds in the company he or she works for and, of course, the business itself. It is understood that there will be no change to the 10% capital gains tax rate levied on gains of up to £2m on the sale of a business. No change to this ‘entrepreneur’s relief’, as it is known, is excellent news for an industry with so many SME-sized businesses. Increasing this tax rate would be a great disincentive as it would almost certainly drive some companies to think about having a base outside the UK.
Helping lower income earners
Personal tax at the lower end of the income scale will be reduced by increasing the personal allowance to £10,000. Again, this is a good move as a creative industry which requires top earners to invest in tax-aided schemes to help investment also needs help for its lower earners. Runners are still poorly paid compared with office workers and any tax aid for them is welcome.
What else should be done?
Bearing in mind the transformation that the media and broadcast industry has been forced to undergo in recent years, will any of the above measures really help it recover? I don’t think so, but I think a few more Vince Cable-esque reforms might get it back on track.
Clean up business ethics
First: regulation to clean up our business ethics. The practice of companies to do deals with the Inland Revenue (prior to one or two phoenixes) should not be allowed. It is widely accepted that taxes need to increase, so why doesn’t the Inland Revenue start by collecting what it is owed? If companies cannot afford to pay their statutory amounts, then they should be allowed to go out of business and their trade can be redistributed to better-managed, more responsible companies. This may appear harsh but the first rule of economic supply and demand is that if there are too many companies for the amount of work in the market then some will fail. At the moment, the rules make it far too easy for companies to fail and pop up again. So, come on government: collect your taxes before increasing them on people with better managed businesses that can afford to pay.
Support smaller businesses
Secondly, I would like to see proper tax relief for companies that invest in business assets. Currently there is a ceiling of £100,000 on first year allowances; it would be good to see this doubled. It may not seem like a great difference but it would enable cameramen and women or small editing companies to buy equipment and get full tax relief in their first year of trading. Also sole traders it would be good for there to be more incentives for the smaller traders who always seem to be missing out on grants, training and the like.
Force the banks to lend
Lastly I would make the government supported banks … lend. Too many of the bailed-out banks seem to be concentrating on stockpiling their capital in order to reprivatize as quickly as possible rather than helping industry. The new government guarantee scheme has been an unmitigated disaster and if I had £1 every time I hear a bad lending tale, I surely will retire soon. Access to capital is essential to help an industry in recession and the way that banks are saying they are lending, when no capital is getting to the grassroots, is almost criminal.
I would very much like to hear your views on the forthcoming budget so please email me on peter.savage@azule.co.uk and/or write to the TV bay editor. If you would like to read previous articles in this series, or if you need business advice, please visit www.azule.co.uk.

Tags: iss042 | finance | budget | azule | business | chancellor | N/A
Contributing Author N/A

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