The Forum of Private Business and BPIF have responded to Wednesday’s Budget Statement by tentatively welcoming several measures but by airing disappointment on others.
The FPB’s chief executive, Phil Orford, said: “The overall verdict is that there have been some tentative steps in the right direction, and perhaps the beginnings of a road map for the future - but for the next year or two, when many of these policies kick in - what small businesses and the economy need are confident strides forward now. Largely, that has not happened in this Budget.
“We saw nothing on reducing the mounting burden of business rates or fuel duty via cuts and a real stabiliser to regulate prices at the pump. These were omissions – and while the Government is working to improve access to funding and bring down banks lending costs by implementing ‘credit easing’ the National Loan Guarantee Scheme, there are concerns that the smallest firms in most need of affordable finance will miss out.
“Further, we called for tax incentives to pave the way for alternative lenders to compete more effectively in finance markets dominated by the big banks, but there was nothing on this in the Budget.
“Reducing the top income tax rate to stimulate entrepreneurship and continuing to cut corporation tax are much-needed measures and we also welcome the concept of merging income tax and National Insurance as a first step in what looks to be long overdue reforms to the tax system for small firms, but the Chancellor could have gone further to give businesses and the economy a bigger boost.”
The BPIF said main plus point to emerge from the Chancellor’s Statement was the announcement of a cut in corporation tax from 26% to 24% from April, with a further reduction to 22% promised in two steps between now and 2014. And by putting more money into ordinary people’s pockets though increased tax allowances, the Chancellor will hopefully boost public confidence and consumer spending, which may bring some benefit to our industry in coming months. Also welcome is the Government’s commitment to retain VAT zero-rating for printed books and newspapers, and the introduction next year of an above-the-line R&D tax credit to encourage more product development and innovation in the UK.
Disappointingly though, the Budget turned out to be a missed opportunity to boost investment. With latest ONS figures reporting a 5.6% year-on-year fall in business investment in Q4 2011, a number of leading business organisations - including the BPIF - had been urging the Chancellor to boost capital allowances. We had proposed 100% allowances for new plant, machinery and buildings, for a period of two years initially. With many small to medium- sized businesses still struggling to obtain external finance, equipment becomes obsolete and over-extended and maintenance costs rise sharply. Fiscal incentives are therefore needed to stimulate investment in the cutting edge technologies required to deliver the innovation and productivity printing companies need to ensure competitiveness. We were disappointed that the Chancellor failed to grasp the chance to put these vital incentives in place.
Other disappointments this year were the failure to introduce a cap on business rate rises – with rates due to go up by 5.6% this year, as well as the Government’s decision not to cancel (at least defer) the 3p rise in fuel tax due to take effect this August.
Kathy Woodward, CEO of the BPIF, added: “I was also particularly disappointed at the lack of any incentives for small to medium size companies to develop both their skills base and of any commitment that Government procurement will be used to stimulate UK suppliers.”
- In parallel to the Chancellor’s Budget statement the Government has published a report entitled ‘Making tax easier, quicker and simpler for small businesses’, which contains a series of pledges it hopes will create the most competitive tax system in the G20 and make the UK the best place in Europe to start and grow a business.