FSB: Budget must provide stability for growth

Economic stability to give small businesses the confidence to grow should be the main message when the Chancellor delivers his Budget on 23 March, according to the Federation of Small Businesses (FSB).

Launching its Growth Manifesto at a speed briefing in Westminster, the FSB told MP’s that decisive action was needed to improve the growth prospects of small firms to avoid a jobless recovery.

The UK’s five million small businesses are best placed to grow the economy and pick up the slack that will be left as the public sector cuts take their full effect, but they need to have a stable economic background in which to do this.

FSB members supported the decisive action to cut the large public sector deficit. However, confidence among small businesses fell at the end of 2010 as did employment intentions. In order to avoid a jobless recovery the FSB believes the Government must show leadership to enable the private sector to strengthen the recovery.

The FSB is calling on the Government to:

Extend the National Insurance holiday for one year to existing businesses with less than four members of staff that take on up to three additional employees. Per year, each employee would contribute an additional £6,000 to the Treasury through employee national insurance and income tax.

Reverse plans to increase fuel duty from 1 April 2011 and introduce a fuel duty stabiliser to help to control inflation, especially as troubles in the Middle East threaten to increase oil prices further. More than 60 per cent of businesses are unable to absorb the cost of the increases and one in 10 firms has said they would lay off staff as a result of the costs.

Tackle rising youth unemployment by providing finance for micro-businesses to take on an apprentice and extending the Graduate Internship Scheme, due to come to an end in March 2011, to create an additional 5,000 places. The extension of the Graduate Internship Scheme would instantly save £1.5 million in benefits payments, as well as contribute an additional £8.77 million to the Treasury over the course of the year.

Declare a moratorium on all new employment legislation for the 12 months following the Budget, to help create a more predictable regulatory environment to enable small firms to take on staff.

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

“The Budget must provide economic stability and look to ways to nurture entrepreneurship and allow small firms to grow in order to create employment opportunities. With the downgrading of GDP in Q4 2010, it is clear that the economy is in a precarious position and small firms that lack confidence in the business environment will find growth risky.

“The Government does have policies available to show small firms it is serious about supporting growth, such as extending the National Insurance holiday to existing businesses that take on new staff and keeping to its manifesto promise and introducing a fuel duty stabiliser.”

ENDS

Notes to Editors

1. The FSB is Britain’s leading business organisation with over 210,000 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

2. To view a copy of the letter sent to the Chancellor and the FSB’s Growth Manifesto, visit www.fsb.org.uk

3. Under the FSB’s plans, businesses that have between zero and four staff will in the next financial year will pay no Employers National Insurance on the first, or next three employees it hires.

The relief will apply up to the Upper Earnings Limit of £844 a week per employee, or about £44,000 a year. Three new employees, on an average weekly salary of £489 (ONS Annual Survey of Hours and Earnings 2009) would save a small business £7,567.86 in one financial year under this proposal.

The Treasury would continue to benefit from the creation of new jobs through income tax and employees national insurance contributions. For example, one employee at an average weekly salary of £489 would still contribute £5,958.48 per annum to the Treasury. This, for three employees would generate £17,875.41.

4. Currently a graduate on Job Seekers Allowance would receive £51.85 a week. Over the course of a six week placement this would be a cost of £311.10. If 5,000 extra placements were created in small businesses (as with the last Graduate Internship Scheme) it would mean a saving of over £1.5 million in benefits alone.

5. Based on 25 per cent of graduates being offered a full-time position by creating 1,250 extra jobs the Government would also save £3.37 million on Job Seekers Allowance payments in the first year of employment without taking into consideration other benefits.

6. If it is assumed that these jobs are offered at £16,000 then each job would return £4,350 of Income Tax and National Insurance to the exchequer in the first year. The tax accrued through creating 1,250 extra jobs (if we take assume that 25 per cent of jobs are offered) would exceed £5.4 million.

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Contacts

Andrew Cave, Chief Spokesperson: 07917 628991
Prue Watson: 020 7592 8121/ 07825 125695
Sara Lee: 020 7592 8113/ 07595 067068 sara.lee@fsb.org.uk

For regional FSB contacts please go to www.fsb.org.uk