Chancellor must cut business taxes on Monday

The British Chambers of Commerce (BCC) is today releasing its submission ahead of Monday's Pre-Budget Report. Some immediate measures the BCC is calling for include the reintroduction of empty premises tax relief, reductions in National Insurance Contribution rates and reversing the increase in small companies corporation tax.

Director-General of the BCC, David Frost, said:

"Britain is facing an extraordinary period in its economic history. Current circumstances are unique, and the global credit crisis is entering a critical phase.

"Monetary policy alone is not enough to help businesses and consumers under unprecedented financial pressure. An effective fiscal package, with tax cuts for businesses at its very core is paramount."

Ends

Media Contacts:

Fiona Cunningham
Tel: 020 7654 5812
Email: f.cunningham@britishchambers.org.uk

OR

Sam Turvey
Tel: 020 7654 5813
Email: s.turvey@britishchambers.org.uk

Notes to Editors:

Summary of British Chambers of Commerce PBR submission

Introduction

The UK economic environment is experiencing unprecedented turmoil and the UK government needs to take action to help offset the effects of a downturn. The BCC has proposed a number of measures for the government to adopt.

Immediate Measures

There are a number of fiscal measures that the government can take that will alleviate the pressures facing British business. These are:

• the reintroduction of empty property tax relief;
• reductions in NIC rates, which would be one of the most effective methods for alleviating the threat of sharp unemployment increases;
• scrapping any plans for an increase in fuel duty;
• the abandonment of legislative proposals on “income shifting” that penalise spousal involvement in business; and
• reversing the increase in the Small Companies Rate.

Further to this, there is a large volume of evidence suggesting that credit lines are being withheld and withdrawn indiscriminately from small businesses. To help with cash flow problems the government should:

•  temporarily extend the Small Firms Loan Guarantee to apply to overdraft facilities;
• put pressure on banks to access the greater funding that has been made available through the European Investment Bank;
• use the leverage they have with banks as a result of taxpayer funding to ensure the right financial support is being offered; and
• ensure that its commitment to pay firms within 10 days is operating as far as it can throughout public sector organisations (also provide a
• commitment to pay correct VAT returns within 10 days of receipt otherwise pay a fee to the business for late repayment).

Medium Term Measures

The Monetary Policy Committee should continue with interest rate cuts. The BCC expect rates to come down to 2 per cent early in 2009, and there is a strong case for reducing rates further to 1.5 per cent, or even 1 per cent in the middle of 2009.

A reprioritisation of government spending would be welcome. Bringing forward public spending should be implemented with a view to priming growth for private sector wealth creators.

A contingency plan needs to be drawn up containing policies to combat the possibility of the downturn dramatically worsening. This should include proposals for SMEs to support business survival and maintain employment.

The government should update the concept of Enterprise Zones - geographical areas offering economic incentives, such as tax breaks. The location of the zones and design of the incentives would have to encourage sustained growth in an attempt to deter capital flight following the cessation of favourable economic terms.