Budget 2007: Business issues

ePolitix.com Stakeholders respond to the business issues raised in Gordon Brown's Budget.

 

Stakeholder Response: Federation of Small Businesses

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Carol Undy, FSB national chairman, said: "This is the chancellor’s eleventh Budget and this year’s offering is no different to the others – he gives with one hand and takes with the other. 

"However, this year, after some welcome initiatives for our members he throws it all away with a tax hike aimed at small businesses. 

"Corporation tax was cut for large firms but increased for smaller ones. 

"Small businesses employ 58 per cent of the private sector workforce - over 12 million people – and the increase in their tax rate fails to acknowledge their contribution.

"A cut in income tax is welcome but does not fully offset the dismay felt by small firms despite the other allowances that he has offered.

"Investing in education is of course vital to the success of British businesses and we welcome the initiative to get Universities and business working together on innovation. 

"However, we have had 10 years of investment in the school system and our members are still reporting a drastic shortage of basic literacy and numeracy skills. 

"Allowances for small businesses to train their employees in basic skills are also welcome to tackle the problem in the workplace too.

"Increasing road tax on larger engine vehicles and company cars will also hit small businesses that use such a car or van for their business needs. Other green measures may also be counter-productive. 

"Higher taxes will rein in the economy at precisely the time when businesses are seeking to invest in new ways of reducing their environmental impact.

"We congratulate the chancellor on accepting our proposals to reduce the business rate relief on empty commercial property. 

"This will ensure the better use of commercial premises. 

"The use of more risk-based regulations for Employment Tribunals is also a boost for small employers.

"On the Lyons review we are pleased that there will be no return to setting business rates at local level. 

"But allowing a variation on top of the business rate and other variable service charges, including a possible bed tax, will lead to even more complexity for businesses to deal with on top of already existing initiatives. 

"Councils will undoubtedly use these powers to bring in more money from businesses rather than hit voters with higher council tax. 

"However, a number of our members are home-based and will welcome the initiative to tackle the problems of the council tax."

 

Stakeholder Response: British Retail Consultation

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British Retail Consortium director general Kevin Hawkins said: "As always the devil may turn out to be in the unannounced detail but the chancellor has rightly made a worthwhile reduction in Corporation Tax and the anticipated ‘green’ measures seem very sensible."

Corporation tax

"The cut in corporation tax is good news. It is being somewhat offset by cuts in a number of tax reliefs but is a welcome simplification and a decisive move in favour of jobs and investment."

On the environment

"We called on the chancellor to cut VAT on energy efficient products to five per cent.

"He could have done that in the UK immediately but his pledge to push for Europe-wide agreement is welcome.

"If the EU is serious about reducing carbon emissions it will back this initiative.

"It is a pity that incentives for small scale renewable energy equipment such as wind turbines and solar panels are confined to homes but the chancellor has conceded the principle.

"We hope this will be extended to business premises next year."

Local employment partnerships  

"This is an imaginative and practical scheme.

"It is not some abstract plan dreamt up by bureaucrats but builds on the help a number of major BRC members are already offering to enable people lacking the skills or self-confidence to get into the workforce more quickly.

"The BRC will be working to widen retail support for it."

 

Stakeholder Response: Finance & Leasing Association

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Martin Hall, director general of the Finance & Leasing Association, said: "We'll have to study the fine print, but at first sight this looks like another missed opportunity.

"By excluding leased assets for SMEs  from the package and re-jigging allowances the way he has, the chancellor has strengthened the current discrimination against leased assets in corporation tax, and he has damaged businesses – especially many thousands of UK SMEs – that want to use asset finance to protect their cash flows.

"I hope he will repair at least some of the damage in consulting on the new  investment allowance.”

Response: Ernst & Young

Paul Davies, UK head of tax at Ernst & Young, said: "The chancellor has woken up to the calls of business that have been ignored in the past, both in the tax rate and tax base.

"The result is a mixed bag of changes that may affect different taxpayers in different ways but should lead to a simplified system overall.

"The cut in the main rate of corporation tax is welcome, showing that the UK is once again on a competitive path. This will reassure those companies thinking of moving offshore.

"However, the gain from the rate reduction will be more than clawed back by the change in plant and machinery capital allowances.

"As a result it is clear that the main beneficiaries of the rate cut will be in the service sector rather than the manufacturing sector."

Personal taxes

"For personal taxpayers it is a similar story: abolishing the 10 per cent band in 2008 will actually raise more money for the chancellor, which will be given back by the reduction of the basic rate from 22 per cent to 20 per cent.

"It is more redistributive for lower earners and those in receipt of child credit and working tax credits.

"The alignment of the National Insurance bands and higher rate tax bands mean that higher earners are more exposed to higher rates of national insurance contributions on more of their income.

"It is also worth noting that the changes in personal taxation are not due to commence until April 2008, by which time the chancellor presumably hopes to be in Number 10, with a view to an imminent general election."