Accountancy Age

Alasdair Darling announced measures on Monday that, according to government calculations, should amount to a fiscal injection of around £25bn over the next couple of years before the chancellor has to start clawing money back to service borrowing of around £118bn by the end of next year.

The delayed increase in small business tax will free up more than half a billion, while action on income shifting will do likewise. Action on vehicle excise duty will leave more than £1.5bn in the economy. Over the next two years VAT cuts should help out to the tune of just over £12bn. There’s also help on how to spread losses.

But the government’s figures also show that the money will start to be clawed back in three to four years through national insurance contributions amounting to billions extra.

On the face of it this is not much more than a two year plan. It seems remarkably short term given that the worst predictions make this the worst recession since the war.

But despite all the actions announced by the chancellor, it will come to nothing if the banks cannot be persuaded to start lending again ­ especially to business. And while there was some rhetoric that the banks should follow the example of Royal Bank of Scotland and freeze overdraft costs, there was little detail from the chancellor by way of an assurance that the lending will come.

There cannot be a small business or practice accountant in the country who is not feeling very queasy about the future of bank lending and ensuring survival level cash flows and it remains highly likely that it is still in the power of the banks to make the real difference.

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