FSB: Chancellor’s Budget must solve banking and unemployment crises

Federation of Small Businesses launches its Budget submission – with tangible solutions to tackling recession

Forcing banks to behave and solving the problem of rising unemployment should be at the top of the Government’s to-do list in the most crucial budget in decades, said the Federation of Small Businesses (FSB).

Proposing a series of practical solutions to tackling the recession, the FSB is calling for automatic rate relief for small firms, an increase in the thresholds before Income Tax and National Insurance contributions are payable and an independent Corporate Mediator to work with banks and their business customers to be put in place in Chancellor Alistair Darling’s Budget on April 22.

In a recent survey of FSB members, a third of small firms said their bank was less helpful now than before the credit crunch began – precisely at a time when help is most needed. The FSB sees resolving the stand-off between banks and their business customers through this mediator as a clear priority.

In calling for the Government to prioritise better support for businesses in accessing finance and regulating their cash flow as a matter of urgency, the FSB proposes:

. A solution to the banking crisis: the Corporate Mediator would act as an autonomous intermediary between the banks and business customers, negotiating resolution where disputes arise; solving financial problems for business owners and ensuring clear communication of support packages on offer to the business community. The FSB has also proposed the introduction of a Post Bank set up in the Post Office network as an alternative to regular banks.

. Building confidence: a healthy rise in Income Tax and National Insurance thresholds to £10,000 in 2009 would put money back into the pocket of the employee and cut the cost of employing staff for business. This would lift those on the lowest incomes out of paying tax entirely, including many self employed small businesses owners, and reduce the number of people claiming tax credits.

. Lowering small business overheads: business rates are the third highest expenditure for small firms after rent and wages, yet every year more than £400million goes unclaimed by businesses eligible for up to £1,200 off their rates bills. The Government must make this rate relief automatic – following the lead of Wales and Northern Ireland – providing valuable extra finance at no extra cost to the Government or tax payer.

John Wright, Federation of Small Businesses National Chairman, said:

“The Chancellor is about to announce possibly the most crucial budget in decades and he has got to get it right. The Government must take decisive action to inject life into the economy and resolve the big problems faced by small businesses: the double whammy of irregular cash flow and a lack of finance from the banks.

“The FSB has come up with strategic solutions to these problems in calling for the Chancellor’s next Budget to include a Corporate Mediator to rebuild the relationship between banks and business; alternative banking solutions such as the Post Bank; and making rate relief automatic – at no extra cost to the Treasury at all.

“Tackling rising unemployment is also going to be vital. Wage subsidies for employers and employees moving towards short-time working, coupled with raising personal tax thresholds to £10,000, will put money back into the pockets of staff and the businesses that hire them.”

Ends

Notes to Editors

1. The FSB is the UK’s leading business organisation with over 215,000 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 http://www.fsb.org.uk.
2. The FSB’s Budget Submission is available at www.fsb.org.uk/documents/budget or please contact marc.shoffman@fsb.org.uk or prue.watson@fsb.org.uk
3. Other measures in the FSB’s Budget wish-list include:
a. A Rural Recession Rate Relief Scheme in England, introducing 100 per cent rate relief for rural businesses for 12 months to preserve local communities.
b. An Enterprise Allowance Scheme within geographical Enterprise Zones for budding entrepreneurs – people who have become unemployed – to start their own businesses. When this scheme last operated in the late 1980s, over 190,000 unemployed people created their own enterprises.
c. Tackling late payments by giving Companies House the authority to name, shame and fine public companies to fulfil their legal obligations to declare their payment terms.
d. A subsidy package to support employer and employee moves towards short-time working.

Contacts:

Stephen Alambritis: 020 7592 8112/07788 422155
Sophie Kummer: 020 7592 8128/07917 628998
Prue Watson: 020 7592 8121/07825 125695
Marc Shoffman: 020 7592 8113/07595 067068
For regional FSB contacts please go to www.fsb.org.uk/regions