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Don’t cut spending at expense of business support, says FPB

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The government should not reduce its support for businesses when it comes to deciding where public spending cuts must be made but should do more to ease the tax burden on smaller firms.

With a reduction in government expenditure almost inevitable as a result of the poor state of the public finances, the Forum of Private Business (FPB) has called on ministers not to sacrifice the funds that are earmarked for helping businesses.

In its pre-Budget Report submission, the FPB has set out a series of measures it would like the Chancellor to announce.

Top of the list is an improvement in the government’s existing business support programmes.

The FPB expressed worries that the Enterprise Finance Guarantee (EFG) and Trade Credit Insurance (TCI) top-up scheme could suffer cuts in funding.

Instead, the FPB wants plans put in place to replace the EFG, which is set to run its course by March next year.

With news that the government is intending to create a National Investment Corporation with over £1 billion available, the FPB argued the case for combining several different forms of finance in order to offer better targeted funding help for different types of small business.

The low take-up of the trade credit insurance scheme prompted the FPB to recommend that the money set aside for it, along with a slice of the funds that have gone into the Working Capital scheme, should be re-directed to other, more productive initiatives.

Matt Goodman, the FPB’s policy representative, said: “Government cuts should not include those programmes that are making a real difference for struggling firms.

“The next 18 months will be crucial. As the main drivers of growth, small businesses need to be placed at the heart of plans for economic recovery so they can make the most of future opportunities.”

Other areas where the FPB would like to see the Chancellor taking action include business tax and regulation.

Given that FPB research has found that, on average, smaller firms spend 37 hours of their time each month keeping up with the rules, the business group has put forward plans for a far-reaching overhaul of the regulatory system.

It said it is looking both for a comprehensive review of regulation and a moratorium on new regulation until the review is completed.

On the issue of business tax, the FPB urged the government to drop its planned increase in the small firms’ rate of corporation tax and instead to reduce it to 20 per cent.

As well as a delay in the 0.5 per cent increase in NICs, due to come into effect in April 2011, the FPB proposed a 12-month reduction in national insurance for those employers with fewer than 10 employees who take on new staff.

The reversion to the old VAT rate of 17.5 per cent should be put back, the FPB added, while the VAT charged on labour-intensive services should be reduced to boost employment.

The FPB also backed automatic enrolment for small business rate relief so that all qualifying firms get the support to which they are entitled.