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Pre-Budget Report must ‘support’ business investment

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The Chancellor should use the pre-Budget Report to provide firms with the sort of financial environment necessary for progressive investment.

The call has come from the EEF, the manufacturers’ group.

In its submission to the Chancellor, the EEF argued that, as well as providing support for firms, the government should take steps to correct the deficit in public borrowing.

But it warned that this must not come at the expense of higher tax burdens for business.

In the short term, the government must press ahead with those policy measures, such as lending support for capital-starved firms, that have put a floor under the recession.

Specifically, the EEF wants the 40 per cent first year capital allowance extended for a further 12 months to April 2011.

A freeze needs to be imposed on the small companies’ rate of corporation tax, again until April 2011.

The rules governing R&D tax credits must, the EEF continued, properly reflect the aims of the scheme, while a temporary extension should be made to the R&D tax credits payable to larger businesses involved in low-carbon projects.

Plans for the future funding of training and skills programmes should be made clearer.

Additionally, given the squeeze on credit now affecting many businesses, the EEF asked for the creation of a bank for industry, which would be able to provide firms with a simple, easily accessible source of growth finance.

Steve Radley, the EEF’s director of policy, said: “We have been through an unprecedented period of instability from which we have yet to emerge. With the road to recovery likely to be long and uncertain, the need for a stable business environment will be just as important during the upturn as it was in the recession. Failure to do this risks pulling the rug out from under companies just as growth looks set to return.”

Mr Radley added: “We must now see policy consistency to rebuild confidence across the economy. But it also critical that the tax system, forward spending plans and financial system all pull in the same direction to support investment and a shift to a more balanced economy.”