Sorry Darling, that’s not a Budget

Imagine asking for an overdraft, but telling your bank manager that it will never be repaid because you plan to carry on overspending for the foreseeable future.

That is what the Chancellor did on Wednesday.

Someone needs to tell him that a budget should not be just a prediction, but rather a tool to help you improve the situation in the future.

But what were the key points in the Budget for businesses?

1. Business losses for this year and next can be carried back for three years rather than just one, getting a refund of previous years’ tax. This applies to losses up to £50,000 and will help if this year’s losses are greater than last year’s profits.

2. Extra time to pay business taxes (including VAT and PAYE), if you apply and qualify. If you expect to make a loss next year, you can now postpone tax on this year’s profit – effectively claiming the loss relief early.

3. Investment allowances on new machinery, computers or other business equipment are temporarily doubled to 40%. Sadly this will not help most small businesses, because you could already claim 100% of the first £50,000 of qualifying capital expenditure.

4. 50% income tax on incomes over £150,000, starting next April. Government revenues from this will be trivial (about 1% of the deficit), but the damage to the economy could be huge. Higher taxes mean less investment, fewer new businesses and fewer jobs, and less spending as the rich leave the UK.

5. Debt, debt, debt - a deficit of £175 billion this year (about a quarter of all government spending), and about the same next year. Even in 2014 the annual deficit will be around £100 billion. This huge debt will drag the economy down for a generation, and dealing with it will be the big political issue of the next few years.

Richard Teather is a Senior Lecturer in Tax Law.