Chancellor Gordon Brown has promised to ease the burden of red tape on small businesses and do more to encourage enterprise in his pre-budget announcement.

Insisting that the economy set for a healthy level of growth over the next year, Brown outlined a number of reforms which he claimed would improve access to finance for startups and reduce the amount bureaucracy small firms have to deal with.

However, the chancellor admitted that the UK will have to borrow £10 billion more than he predicted earlier this year, prompting his Tory opposite number, Oliver Letwin to accuse him of “taxing and spending and failing.”

The government is now set to borrow £37 billion in 2004 in order to meet its public service spending commitments, although businesses will be relieved that the chancellor did not announce further tax rises on companies to help meet the shortfall.

Brown insisted that the economy would grow by 3.5 per cent next year, although many analysts have raised doubts over this figure, claiming that growth will be nearer to three per cent.

The chancellor revealed plans to allow employers to offer employees a tax-free £50 a week for childcare and announced that 1,000 extra children’s centres will be created to aid working parents.

Small businesses were also promised improvements to the VAT flat-rate scheme, to allow more enterprises to benefit from compliance savings.

Other key business measures announced include:

  • Measures to overcome barriers to raising finance, including new Enterprise Capital Funds and improvements to the Venture Capital Trusts and Enterprise Investment Schemes.
  • The launching of an independent review into the Small Firms Loan Guarantee to assess its effectiveness.
  • Encouraging a “step change” in the UK’s enterprise culture, aided by a national campaign to boost startups by Enterprise Insight.
  • An extension of Employer Training Pilots for a third year, to help solve the chronic lack of skills in UK workplaces.
  • £190 million to be spent on boosting skills levels.


The chancellor also announced tax breaks on alternative fuels to help promote green business and said that the Child Tax Credit will be raised by £180 per year to help working parents.

Brown said that it was time for the UK to capitalise on the growing world economy on a “prudent and sustainable basis” and hailed the pre-budget statement for strengthening “economic stability, enterprise and fairness.”

However, Letwin accused Brown of failing to introduce public service reforms and piling too much red tape, targets and taxes on businesses and the public.

Brendan Barber, general secretary of the Trade Union Congress (TUC), was more supportive of the statement, saying that the UK economy was set to deliver the government’s generous public spending commitments with no need for tax hikes.

“There is much to welcome in the detail. We are particularly pleased to see the increase in help with childcare costs, and the big boost in investment in skills.

“This is a real agenda for the workplace,” he said.

Digby Jones, director general of the Confederation of British Industry said that firms will be relieved to see no nasty shocks in the shape of further increases in the business tax burden

"The Chancellor is right to raise borrowing rather than go for spending cuts or tax increases at this stage.

"But the medium-term outlook remains a worry. Tax receipts are lower than expected and growth forecasts still look too optimistic.

"The Chancellor may still meet his golden rule, but the safety margin is disappearing fast,” he said.

The Federation of Small Business (FSB) also gave a broad welcome to the statement but pointed out that similar announcements in the past had not been fulfilled.

The FSB said it was pleased that Brown acknowledged the large amount of red tape that originated from Europe and called on the chancellor to “bear down hard” on the EU to ensure small businesses’ views are not ignored.

Neil Hamper, of the FSB, said: “A number of these measures are already known to us and we would urge the chancellor to introduce symmetry into the debate by coupling stability with regulatory stability as small firms are hardest hit by the cumulative impact of regulations.”

George Cox, of the Institute of Directors, said that he welcomed the moves to stimulate enterprise and the growth of small businesses.

“We appreciate that at last there is a growing reaction that over-regulation is stifling business and we are pleased to see that the government is beginning to respond to our members’ strong concerns about the red tape burden,” he said.