Businesses win some and lose some with the Pre-Budget Report

Wednesday 6 December 2006

The Federation of Small Businesses (FSB), the UK’s largest business organisation, gave a lukewarm reaction to the Chancellor of the Exchequer’s Pre-Budget Report, delivered to the House of Commons today.

The FSB welcomed the Leitch Review on Skills, assistance for small businesses to seek protection for their trademarks, protecting law-abiding business from competitors who avoid paying the minimum wage, avoiding the re-instatement of the fuel duty escalator and reform of the planning regime.

However, small businesses would be less pleased with the lack of an announcement on reducing the complexity of the taxation regime, a threat to force business to train their staff regardless of their individual needs, the plan to introduce road pricing and a rise in fuel duty.

John Walker, FSB National Policy Chairman, said:

“At first glance the Pre-Budget Report has a ‘some you win, some you lose’ feel to it for our members. As in previous years there were some welcome measures in the Chancellor’s speech but there were also parts of the speech that will hit small businesses, which produce over 50% of GDP, very hard.

Turning to specific points in the speech Mr Walker commented as follows:

On increased transport taxes:

“We are very concerned that small businesses will be collateral damage in the drive for cleaner cars. Small businesses cannot change their journey times or ditch their current vehicle today and buy a new one tomorrow. Greener vehicles should be taxed more lightly but older cars should not be penalised because new cars are expensive to buy. Specific measures will be required for rurally-based businesses that cannot access public transport.

“A successful economy depends on being able to move goods, services and people across the country. Increasing aviation and fuel taxes will not help small business to increase productivity. However, we welcome the decision not to re-instate the fuel duty escalator.”

On measures to police the minimum wage:

“We welcome the move to police the minimum wage more effectively. Our members are the most affected by those who act illegally to undercut them. The monitoring of the minimum wage need not be heavy-handed or time-consuming for small businesses but it should hit law-breaking employers hard.”

On risk-based business inspections from local authorities:

“We have campaigned long and hard for risk-based business inspections to ensure that inspection authority resources are targeted at the right areas. This welcome move will also remove a large burden from many low-risk businesses.”

On the absence of measures to simplify small business taxation:

“After several years of increased complexity it is very disappointing that there was no signal of a change in direction on the complexity of the tax regime. It has cost small businesses a lot of time and money over recent times to comply with tax form requirements or hire external expertise.”

On increased spending in education and skills:

“Our members constantly tell us that school-leavers do not have the required literacy and numeracy skills to allow them to contribute to the business from their first day at work. They also do not possess the so-called softer skills such as effective communication, punctuality and self-presentation. Extra money is not enough. The current system is obviously not working and before the new money is wasted radical reform for the education sector is desperately needed.

“Businesses will do their bit in training their employees but the foundations must be laid at school. The Government is failing its exams on that subject.

“An expanded apprenticeship scheme is good news and a greater emphasis on skills for the workplace will be welcomed by many of our members.”

On the Leitch Review Colin Willman, FSB Education Chairman, commented:

“Lord Leitch’s review on skills is a constructive first step towards providing businesses with the capable workforce that it needs. He is right to say that skills provision must be led by demand from businesses. The requirements of small business must be a priority because they employ 58% of the private sector workforce. Our average member employs four people. They need bite-sized courses, based in the workplace, to avoid losing a large proportion of their workforce when only one member of staff is being trained. This will enable small business to train their staff and will also avoid the need for heavy-handed Government compulsion.

The FSB’s 2006 member survey found that many employers are keen to train their staff and that:

• 45% of businesses responding stated they had encountered literacy or numeracy shortages amongst new staff.
• 52% of small businesses say that with financial incentives they would be able to pursue more training for employees.
  Wage compensation to small businesses for lost staff that are on training courses would encourage
• 37% of small business to engage in such training.
• 18% of small businesses are seeking to grow through investment in staff training.
• 76% of small businesses undertake staff training. However this only takes into account formal training, all business have carried out training of a more or less formal nature in the past two years.

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