In my view

It is a characteristic of most commentators living in this region that all Budgets are greeted with the question: "What has it done for the North?"

It is a characteristic of most commentators living in this region that all Budgets are greeted with the question: "What has it done for the North?"

If the North is to live up to the dynamic and newly enlivened image we are portraying, we desperately need to create more indigenous businesses. In the 1970s and 1980s our difficulties were caused by an over reliance on traditional industries that could never sustain a case for subsidy. Today, there is an over reliance on public sector jobs. The Chancellor's recent call for public sector pay restraint proves that these jobs are as much at the mercy of Westminster decisions as jobs in large multi-nationals are to their head offices outside the region.

Last week's Budget could have addressed this issue, instead it left me cold. It hurt the very people in the North who are preparing our private sector for the challenge it faces in the future: the entrepreneurs, who are creating locally owned businesses employing local people. Faced with a choice, the Chancellor decided that the business tax cuts went to larger businesses while tax rises went to the smallest businesses.

Why is this important to the North? Because in the most successful economies, the combined number of people employed by small businesses is much bigger than those employed by larger firms.

The Chancellor's case for his small business tax rise is that he was closing a tax loophole. If that is true, it was a loophole that he created.

A few years ago Mr Brown reduced the tax rate of small business to 20%; lower than the income tax rate. It encouraged more people to change from being self-employed to creating limited companies. On occasions, these companies were used for simple tax avoidance: directors received dividends, but didn't go on to employ people. Mostly, however, people invested their capital in new small businesses, received dividends as a reward and watched as the fruit of their enterprise grew and went on to employ people. Gordon Brown's first decision to cut small business tax was the right one. Small businesses should be given tax dividend treatment that encourages people to own and invest. They are a gateway to enterprise for people who would otherwise have the door to ownership closed to them.

The Chancellor's tax choice for business has resulted in an interesting outcome for the Labour Party. Mr Brown has ensured that a small shopkeeper gets a tax rise of 2%, while Tesco gets a tax cut of 2%. It makes our tax treatment of large firms internationally competitive but it is hardly equitable!

Some of the North's most successful entrepreneurs started small businesses. Take Duncan Bannatyne. He started in business as an ice cream man with one van before multiplying the number of vans and turnover. Reading his book, Anyone can do it, you can follow his journey from risking his mortgage to reaping the rewards of a serial entrepreneur worth over £200m. I can point to nursing homes, nursery schools, hotels, health clubs, bars and even radio stations that are here because of his enterprise and are providing nearly 10,000 people with well paid jobs.

Bannatyne gave up his job in the enterprising 1980s. He took the risk that got him into the new emerging economy that is serving the region so well today.

If future Budgets are to serve our region better we need Government to do for the North what only it can. How about Enterprise Zones, which were tried in the early 1980s and were designed to make our region more enterprise friendly? If a new company is established in certain parts of the region, why not exempt it from key business taxes or capital gains tax? Changes to our transport infrastructure will help us too: improving our major roads, doing something to help with the exorbitant cost of rail travel.

Maybe, as Prime Minister, Gordon Brown will look at the way policies can help regions like ours before hurting the very small businesses that could go on to be long-term saviours of our regional economy. His instinct on small business was right when he cut the tax. It is a shame it couldn't last.

* Graham Robb is a Conservative activist and partner at Recognition Marketing & PR LLP.

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