Budget 2010: £15bn more public sector contracts for the SME sector

Chancellor Alistair Darling has presented the last Budget of the current administration, outlining a range of attempts by the Government to balance the nation's books but stimulate the fragile economic recovery.

Darling did not give any specifics of the spending cuts Labour plans in areas such as health and education, saying only that the post-election settlement would be "the toughest for decades". Small cuts announced in the pre-budget report, including those affecting the controversial NPfIT NHS IT system, will go ahead, he confirmed.

An extra 15% of central government contracts would be awarded to small and medium-sized businesses, which could mean up to £15bn of new business across the whole of the public sector.

A new national investment corporation, to be called UK Finance For Growth, is envisaged as streamlining and improving government help to small and medium-sized enterprises, while overseeing £4bn of support for business.

Other measures include a new Growth Capital Fund that will provide growing firms with private capital and should ultimately provide £500m of finance.

The Government also said it will publish all public service contracts worth more than £20,000 online by the end of 2010.

Darling told the House of Commons this afternoon that the economy will grow by between 1% and 1.5% this year and between 3% and 3.5% in 2011, with his forecast for the next few years unchanged. Last year he forecast GDP would grow by at least 3.5% in 2011.

The chancellor said he would stick to the plan to cut borrowing by half over the next four years and that the government will need to borrow less than expected this year to plug the gap in the UK's finances, £167bn, instead of the £178bn he had flagged in 2009's pre-Budget report. But that still means public sector borrowing this year will be at a record high of an equivalent of 11.8% of GDP.

“The government should not be targeting arbitrary levels of expenditure at SMEs, it should simply be trying to get the best value from every penny of expenditure,” commented Matthew Eatough, CEO of buyingTeam, in response to the news. “It strikes me as rather short-sighted that the chancellor would allocate 15% of expenditure to suppliers based solely on the size of their business.  Very little thought can have gone into this as, aside from the operational problems it poses, EU Public Procurement directives, among other legislation, pose very real obstacles to this change.”