There has been a lot of speculation on whether we will see any significant changes to the rules surrounding VCTs or EISs in next week's Budget. Are VCTs about to disappear? Or perhaps change beyond recognition?

I think we will see that next week's Coalition Budget will strengthen support for these tax efficient vehicles. However, it will come with one crucial proviso - and that is that VCTs and EISs must invest more effectively into genuine venture companies. The detail will be revealed on the day, but I would suggest that tax reliefs will be enhanced and that the rules on what a VCT can invest into will be tightened. The thinking behind this is to ensure more of the money raised by VCTs and EISs actually goes to support innovative and exciting companies that will deliver strong growth to the British economy.

The background to why these changes may come isn't hard to find. It revolves around the fact that investment into real venture companies has fallen steeply over the last few years. Investment in venture capital in 2008 was £1.30bn. But within 12 months it had fallen by 48% to just £666m. Yet this was in the face of a steep increase in money raised by VCT and EIS funds. Both George Osborne and David Cameron have made speeches in the last few weeks in which they have clearly stated we need to support innovation in order to drive the economy forward. NESTA, the National Endowment for Economics, Science, Technology and the Arts reported in January that supporting high technology and innovation would be the fastest way to aid an economic recovery in this country. Small wonder then that the government is looking at ways to make this happen. 

Which brings me back to VCTs and EISs and the deduction that the government needs to do something to make them more attractive to investors. Then make sure that enough of the money raised is going to companies that need it. 

To return to the original question - are VCTs about to disappear? I don't think so. The VCT is the primary vehicle for investors to support British innovation and right now, investors and the economy need more, not less of this.

Julian