If Alistair Darling was hoping he could win back the hearts and minds of businesses with his shower of small-scale measures to help entrepreneurs in the Budget, he was only partially successful.

Business leaders, still stung by a previously announced one percentage point rise in national insurance contributions from next year, welcomed the enterprise announcements but warned that tougher steps would be needed after the general election to curb public spending.

The chancellor, claiming his Budget would “secure the recovery, tackle borrowing and invest in our industrial future”, put small and medium-sized businesses at the centre of a £2.5bn growth package.

Seeking to build on the “industrial activism” championed by Lord Mandelson, business secretary, Mr Darling pledged a partnership with business that would steer between the interventionism of the past and the hands-off approach of free-marketeers.

The business response was wary. Many executives have lost faith in the government, even if they are far from convinced by the Conservative alternative.

Richard Lambert, director-general of the CBI employers’ group, said it was a “clever political Budget” that artfully targeted both electors and the bond market, but the tough decisions were yet to come. “Anxiety remains on how the deficit is going to be paid down, and the growth forecasts for 2011 and beyond are still on the optimistic side.”

He said the growth package, though “necessarily modest”, was correctly targeted at small and medium-sized companies, innovation, infrastructure and science and technology skills.

Mr Darling’s package included doubling the annual investment allowance to £100,000 and doubling the threshold for entrepreneurs’ relief from capital gains tax to £2m.

He also pledged a one-year cut in business rates from October for properties with rateable values of up to £12,000 and an extension of the HM Revenue and Customs’ “time to pay” scheme, allowing businesses to spread their tax payments, to last the whole of the next parliament.

A credit adjudicator service will examine complaints about bank lending decisions, with power to enforce judgments, and the government’s £4bn range of finance support for business will be brought into a new national investment corporation, UK Finance for Growth.

The government will also raise by 15 per cent the proportion of central government contracts that go to SMEs. A £35m university enterprise capital fund will support spin-out companies and there is extra spending for university places in science, technology, engineering and maths.

The Institute of Directors said the budget deficit reductions did not go far enough and complained about the failure to reverse increases in the top rate of income tax and national insurance contributions. “We need to hear a lot more from the government on debt reduction,” said Miles Templeman, the IoD’s

Steve Radley, director of policy at the EEF manufacturers’ organisation, said industry would be relieved that the chancellor had resisted the temptation to announce extra spending before the election but “a plan for fixing the public finances is still urgently needed”.

“Some measures, such as the Green Investment Bank, show the chancellor has not taken his eye off the medium-term needs of the economy. However, frequent changes to taxes such as those to investment incentives compound the view that the tax system lacks direction and predictability,” he added.

David Frost, the director-general of the British Chambers of Commerce, said the chancellor had “clearly recognised the need to place business at the heart of this Budget” but could have done more to set out a clear plan for reducing the budget deficit.

The Federation of Small Businesses welcomed help for small businesses but said it was disappointed the chancellor was proceeding with the NIC increase.

The FSB was pleased with the prospect of 345,000 small businesses in England being taken out of the business rates system and said it looked forward to the introduction of the new credit adjudicator.

The proposal to phase in a 3p per litre increase in fuel duty would be of some help, the FSB said, but it remained concerned at the 1p increase due next month.

Get alerts on UK business & economy when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.

Comments have not been enabled for this article.

Follow the topics in this article