Brown urged to give small firms a break in pre-budget report

The report, due to be presented by the chancellor on 10 December, will explain how the government has implemented changes announced in the budget and what measures the Treasury will take between now and next spring.

In their submissions to the government ahead of next Wednesday’s announcement, the main business lobby groups have unanimously called for the chancellor to cut red tape and ease the burden of taxes on small firms.

In its submission, the Federation of Small Businesses (FSB) said that the government needed to reduce regulation and give small firms a “fair slice” of public sector contracts.

In its ‘wishlist’, the FSB urged Brown to:

• Combat red tape by returning responsibility for paying state benefits to the taxman.
• Recognise that micro businesses are the backbone of the economy by reducing the tax burden on the self-employed.
• Introduce radical measures to combat the informal economy.
• Bring in tax breaks for businesses to assist them in making their premises accessible to disabled people.

Neil Hamper, financial affairs chairman at the FSB, said that British businesses are missing out on billions of pounds of lucrative contracts because they are required to jump through hoops and wade through red tape.

“Government contracts should be advertised more widely and businesses should be able to register their interest more easily and at any time,” he said.

Hamper insisted that one of the main constraints on the ability of small firms to create jobs was the “disproportionate” administrative burden that falls upon them.

“We are urging the chancellor to kick-start a renewed government effort to combat red tape by returning responsibility for paying state benefits and collecting loan repayments to the experts in government agencies such as the Inland Revenue.

“A self-employed person now pays up to 32 times more tax than his incorporated counterpart. No other tax system in the world favours one form of business structure over another or penalises the smallest businesses in this way,” he said.

The Institute of Directors (IoD) called for a new Third Rule policy, where the government would commit to reducing the tax burden as a proportion of GDP over an economic cycle.

Graeme Leach, chief economist at the IoD, said the Third Rule had broad support among the organisation’s membership, who felt that businesses were treated unfairly in terms of tax.

“The New Third Rule would provide a tremendous long-term boost to business confidence in the UK. It would also be extremely attractive to overseas investors in the UK.

“A government mindful of the New Third Rule would have to rein in tax and spend policies,” he said.