Pre-Budget Report 2009 – small businesses and the Christmas Chancellor

What will small businesses end up getting from their fiscal wish list dispatched to a decidedly unfestive, Christmas Chancellor in next week’s Pre-Budget Report?

4th December 2009 at 5:09 pm

Britain’s small businesses are unlikely to find much Christmas cheer in what could well prove to be Alistair Darling’s last Pre-Budget Report (PBR).

Politicians used to demonstrate their machismo by being ‘tough’ on crime. Now the order of the day is who can make the toughest decisions on cuts. Austerity is where it’s at.

Alistair Darling - no ho, ho, ho Pre-Budget Report

Alistair Darling - no ho, ho, ho Pre-Budget Report

But like the cuts vs investment see-saw on which the Chancellor and the Prime Minister appear to be sitting, getting the fiscal balance right to benefit UK small businesses is going to be tricky.

Nevertheless, a thriving small business sector is what we need and cost cutting or raising taxes at its expense would be counter-productive.

The Federation of Small Businesses neatly summarises its members’ desires in a 10 point PBR wish list.

Perhaps the most critical of these are:

  • a National Insurance rebate in 2010/11 for firms with fewer than 50 employees who create new jobs;
  • no corporation tax increases;
  • no increases in employers’ National Insurance Contributions, getting rid of plans to introduce rises in 2011;
  • a delay to the VAT increase due to come in on 1st January 2010;
  • automatic business rates relief, rather than the system currently in place which forces firms through a bureaucratic system in order to benefit, and;
  • extension of the Enterprise Finance Guarantee Scheme beyond March 2010.

But the small business group has also made some interesting suggestions about how to plug finance gaps for SMEs.

These include the establishment of Regional Stock Exchanges and turning the Regional Development Agencies (RDA) into regional finance agencies.

The former is a fascinating idea with historical precedent currently being explored by Vince Cable of the Lib Dems.

But many would be less enthusiastic about handing funding issues to the RDAs, often seen as expensive, resource-hungry, bureaucracies.

Like a child posting a letter to Santa, the FSB is unlikely to get everything on its Christmas wish list and Alistair Darling’s not exactly in ‘ho, ho, ho’ mood.

Smith & Williamson takes a colder eye to the likely outcomes next week.

The accountancy firm warns that in an attempt to shore up public finances, the Chancellor may look to raise VAT to 20%, futher increase corporation tax on small businesses just as more of them are likely to be making a profit, and increase the top rates of tax.

The one small gesture it expects for SMEs is an extension to the Business Payments Support Service and possibly the Enterprise Finance Guarantee Scheme.

Tim Lyford, head of corporate tax at Smith & Williamson argues that much of the above:

… could add up to some painful tax increases, but the Chancellor should recognise the fragility of the economy. No one can be sure we have reached recovery-mode and he should moderate any revenue-raising ambitions accordingly.

Let’s hope Mr Darling listens.


Alex is the founder and editor of SmallBizPod, the UK's first podcast dedicated to small business, start-ups and entrepreneurship. Alex writes about topical small business issues, entrepreneurs and anything else that catches his eye here on the small business blog.

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  1. […] as predicted last week, the Christmas cheer is in short demand for small businesses who, while benefiting in some areas […]

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