FSB: Budget speech dismays small businesses

The Federation of Small Businesses (FSB), the UK’s largest business organisation with 205,000 members, today reacted to what is expected to be Gordon Brown’s last budget speech by criticising the Chancellor’s move to ramp up corporation tax on small businesses while cutting it for larger firms.

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 fifty eight per cent of the private sector workforce – over twelve 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 ten 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.”

Notes to Editors:

1. The FSB’s reaction above is an immediate response to the Chancellor’s Budget speech. Detailed examination of the accompanying Finance Bill will be required before the changes affecting small businesses can be fully evaluated.

2. The FSB’s Budget submission can be found at http://www.fsb.org.uk/documentstore/filedetails.asp?ID=372.

3. The FSB is Britain’s biggest business organisation with over 205,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk.

4. The FSB’s Annual Conference in Belfast begins on March 24th. The event will hear from Shadow Chancellor George Osborne and Small Business Minister Margaret Hodge, as well as from business leaders and Northern Ireland politicians. For more information please go to www.fsb.org.uk/conference2007.