How the Budget can help growth

But a longer-term consideration of "paying" for business-enabling measures means effective measures that allow business to flourish. It also means measures that pay for themselves – and more – through increased corporation and personal tax, and a broadened base for the national insurance tax on employment.

For their part, successful Scottish companies have plenty of ideas about how small targeted measures could add up to a critical mass of growth.

Meanwhile, despite the multitude of Keynesian commentators, Scottish Government ministers and trade unionists urging a reversal of the Coalition's policy of fiscal consolidation to eliminate the deficit and reduce debt repayments, there are few employers or business organisations taking this line.

What, then, would help? How about the scrapping of the planned 5.6% hike in business rates, argues Liz Cameron of the Scottish Chambers of Commerce, fearing going ahead with it will only add pressure to the Scottish Government to do likewise north of the Border.

Another area of broad agreement in Scotland is that there should be no repeat of last year's unpleasant surprise of extra North Sea oil and gas taxation. Also nobody wants to see recent corporation tax reductions reversed, given that, in the absence of traditional forms of bank lending, retained profits now have a big part to play in funding future investment.

The Federation of Small Businesses, wishing for an entirely new Whitehall department to help provide finance to the small-business community, is part of a chorus of pressure groups urging the accelerated development of alternatives to the high-street banks. After so much talk, it wants these to be developed as a matter of urgency to give the small business community more choice and the existing banks more competition.

The FSB is wary of the Chancellor's existing credit-easing plans, and worries the scheme is going to be run like the old Enterprise Finance Guarantee (EFG) , which, for all the high-level pledges, bank staff were barely aware of. Scotland's small-business banking market is unusually concentrated, with over 75% in the hands of RBS and Lloyds. While the Lloyds divestment means more Co-operative bank branches on our high streets, questions remain about Clydesdale's future as a lender.

Osborne has been urged to consider rethinking fuel taxes, given the acute pain they are causing around rural Britain, nowhere more so than in Scotland outside the central belt. The Taxpayer's Alliance has calculated that when putting £60 of petrol in your tank, the cost of the fuel amounts to only £23.86. The rest is made up of indirect taxes. By their calculation, the national cost of "excessive" motoring taxes was £18.1 billion in 2009, or £293 per person. For the many parts of Scotland where public transport is highly intermittent at best, fuel charges are increasingly seen as an unfair tax on countryside living, which threatens to swamp any benefits that the superfast broadband revolution – whenever it happens here – might bring to remote parts of Scotland as a place to do business.

Also on infrastructure, the Scottish Chambers of Commerce are pressing No 11 for devolution of air passenger duty (APD) to Scotland or, at the very least, the introduction of the following measures: a reduction in duty to assist UK regional airports, the introduction of a £1 billion capital allowance scheme for medium-sized companies for the next two years, and accelerated credit-easing measures.

Elsewhere, businesses are looking for surgical strikes on the UK's cumbersome tax system to attract further investment in firms, and new capital allowances to attract additional private investment in infrastructure.

The CBI has proposed detailed technical changes to the tax system, such as ensuring that changes to the UK's Controlled Foreign Companies regime make it simpler to tax foreign profits. They also want to introduce a new capital allowance to attract investment into currently unqualified types of infrastructure such as power stations, waste-treatment plants, airports, and other industrial buildings. Another investment-boosting suggestion is expansion of the Enterprise Investment Scheme which reduces the cost of raising equity for small and medium-sized businesses and improves incentives for entrepreneurs' relief.

In tune with the general feeling that the Chancellor must reorientate government messaging as radically pro-growth rather than anti-debt, the Institute of Directors (IOD) would like to see a budgetary announcement of a 3% sustainable GDP growth target, policed by a beefed-up version of Osborne's own Office of Budgetary Responsibility, which would assess current government policy on whether it was pushing long-term growth prospects up or down.

In its dreams, the IOD also wants the Chancellor to commit to a 35% public-spending-to-GDP target ratio for 2020 (in 2010 it was 45%) conceding that while certain aspects of public spending, such as infrastructure, can be positive "the general rule is that a bigger state means a lower long-term GDP growth rate". The directors' body points out that the next national nightmare – the long-term costs of an ageing population – demands a low ratio target to accommodate upwards pressure in future.

George Osborne, like Gordon Brown before him, has been criticised as a political chess fiend rather than a long-term economic visionary. However, a cosmetic 2012 Budget that does not give business a radically large dose of confidence to invest and expand in the UK will be seen as missing its moment. At this stage in the life of the government, anything but a Budget to encourages private-sector investment through better use of capital allowances, using the tax system to tease out growth, will be seen as failure. There will little time left to regain the lost opportunity.

TAX RELIEF

Dr Jennifer Newton, managing director, Express Microbiology, Linlithgow:

Lower corporation tax would give companies like ours – which tests food and water for supermarkets, hotels and others – some money for reinvestment, but the first thing the Chancellor should look at is reversing his proposals on tax relief for capital expenditure. There is talk of his reducing the threshold where relief applies from £100,000 to only £20,000. We would like to double the amount of lab space we have here but this proposed change means that the sum we would get tax relief on has reduced by £80,000, so we won't be able to afford it next year. We were going to triple our turnover to £3 million and double our workforce, so 25 people in Scotland who would have been working for us, now won't be.

The Chancellor also needs to relax employment restrictions for small businesses to give us more freedom to be flexible with the workforce. Small business needs more autonomy, so that if plans haven't gone as hoped we can lower employment to remain competitive and hire again when things improve. We don't need legislation as small businesses are good to employees, we need to be as we work so closely with them!

CORPORATION TAX

David Smithers, finance director Velos-IT, Glasgow

Velos employs 80 people, and its turnover for the last full year was £5.6m. We are looking to grow that, with help from Scottish Enterprise. For small companies, the rate of corporation tax is 20% with a £300,000 threshold. For large firms it's 26% with a £1.5m threshold. For companies like ourselves that are pushing that lower limit, when we jump over that threshold, we are faced with a big jump in tax. We would argue that a phased approach bridging the 20% and 26% rates would be beneficial.

We are looking at winning new contracts for next year we are also looking at margins and how we could drop them to win new business. It would be double whammy if we move above that tax threshold, and a lot of companies are facing a similar situation. We want to generate a steady margin, so any change in tax means we need to vary the price to customers. Making allowance for the extra 6% tax rate is a difficulty that makes us less competitive abroad.

We would welcome any further downward movement in corporation tax, but given the general climate we probably wouldn't expect it.

Another area is the employers' national insurance rate, which, at 13.8%, is a fairly hefty addition to our salaries bill. Some have called it a tax on jobs and it certainly diminishes our ability to pay more attractive salaries. We would like to see the Chancellor reduce it.

SUPPORT FOR BUILDING

Don McLean, chief executive, Integrated Environmental Solutions, Glasgow:

We are the global leader in testing the sustainability of buildings. Some customers have temporarily sorted themselves out through downsizing, but our construction-industry customers are being hurt badly.

More could and should be done to help infrastructure and general building in this Budget. The current situation means it is increasingly hard to undertake projects, while target figures for reducing emissions are not being met,

Greater support could be given though the tax system to those who make a contribution to carbon-reduction targets. Such measures would be killing two birds with one stone – improving investment and sustainability.

If you invest directly in the renewables sector, that helps wind-turbine and solar-panel makers but not necessarily the construction industry, But incentivising more energy-efficient buildings through tax relief and subsidy would help kick start the builders.

The Chancellor is not going to suddenly help a company like ours but the benefit of this kind of measure would filter down to us. In other countries in Europe they give you tax breaks if the building you construct or refurbish meets certain criteria. It makes these projects much more attractive and helps the government meet its targets.

FREE ADVICE

Colin Borland, head of external relations, Federation of Small Businesses (FSB) in Scotland:

"Most people accept there's still a significant problem with business finance. We need to plug the hole left by the banking crisis. That doesn't just mean keeping an eye on the, it means developing alternatives to traditional overdrafts and bank loans.

The FSB is beginning to see some evidence that our members are feeling slightly more confident than they have done in the past. This is encouraging, but we're hardly out of the woods yet. A sustained period of mass unemployment is the greatest threat to communities and local economies in Scotland and we need to see real, radical action to create the climate in which the private sector can create the jobs we urgently need.

When the Chancellor stands up to deliver his Budget, he needs to outline Plan G – a plan for economic growth."

Stephen Boyd, Assistant Secretary, STUC:

"The economy remains depressed with output still over 3% below pre-recession levels. Unemployment is high and rising. Corporations are hoarding a mountain of cash because they discern no reason to invest. As the OBR has confirmed, the various supply side measures announced in the PBR will have negligible impact.

On March 6 the UK government sold £1bn of 22-year inflation-linked bonds at a yield of 0.044%. The market is screaming at the Government to bring forward future investment in order to stimulate growth and jobs today. It should do so with some urgency; starting with housing, public transport and digital infrastructure. This will boost demand now while expanding capacity in the longer-term."

Liz Cameron, chief executive, Scottish Chambers of Commerce:

"This budget is a major opportunity to respond to the recent downgrade of the economic forecast for 2012 and introduce measures aimed at supporting businesses until growth becomes more normalised. In addition, unemployment in Scotland will continue to increase this year, so we must reduce costs on business and boost cash flow. We want a package including a targeted and time-limited capital allowance scheme aimed at growth businesses and their supply chains.

We are also seeking a lead from the UK Government on tackling the unwarranted 5.6% rise in business rates throughout the UK, due to take effect on 1 April. The deferral schemes announced by the Government are not good enough. Scottish businesses should not be paying a 5.6% 'inflationary increase' at a time when RPI inflation is 3.9% and falling.

David Watt, director, Institute of Directors, Scotland:

We oppose the tapering away of the personal allowance once income exceeds £100,000 – The taper creates a ludicrous 62% marginal rate for those affected. We urge the Government to reverse this policy and recognise that the personal allowance is a nil rate band which should be available to all. This change would cost roughly £1.5 billion, a relatively modest sum which should be affordable.

With regards to the 50% Income Tax rate – This may or may not have raised revenue in 2010-11. But even if it has raised money, we believe this will only be a short-term effect and that it will be a revenue loser in the longer term when taxpayers have had a chance to adjust behaviour. We urge the Government to state the date on which the 50 per cent rate will be abolished. The 50% rate sends out to the world the signal that the UK is a high tax economy.

David Grahame, executive director at LINC Scotland

"Although the 50% tax relief for individuals under the Seed Enterprise Investment Scheme [a scheme to promote investment in start-ups] appears generous, the details are not yet in place. We would like to see the new tax reliefs pursued responsibly and in a way which meets the economic-policy intent behind them and not just see it going into clever tax-avoidance products. We're keen to ensure that our marketplace, which is very high risk at any time, does not suffer reputational damage through being driven just by tax avoidance.

Many other aspects need to be considered to optimise risk management and overall returns, which is why we have been driven to host a seminar for investors on the topic in May once the details have finally emerged. If one accepts that the three main 'levers' on the angel market are tax incentives, access to co-investment and direct support for delivery mechanisms (in our case angel groups) then Scotland is almost unique in having all three well developed and is well placed to capitalise on this new stimulus."