Business secretary Lord Mandelson has indicated that next Wednesday’s Budget will focus on creating a supportive environment for small businesses.
In a speech at the Federation of Small Businesses (FSB) annual conference earlier today, Mandelson said he had no problem with the forthcoming election being “a bit of a referendum on how we back small British businesses to drive the recovery”.
While the two frontrunners have both acknowledged the key role small firms will play in leading the recovery, they are currently split on the best way to help them do this.
The Tories have called for an urgent review of public spending to address the national deficit, while Labour has warned that premature cuts could jeopardise the fragile recovery and cause a ‘double dip’ recession.
“We all know the election is not far off. Business is looking for a clear vision,” Mandelson said.
“First and foremost that means prudent action on the public deficit. But it is crucial that government strikes the right balance in deciding how and when to cut.
“Private demand is still very weak. For thousands of businesses, it’s only public spending that is keeping people in jobs and businesses in contracts. Cut it away before private demand is strong enough to take its place and we put the recovery at risk.”
However, despite sustained pleas from business lobby groups to scrap the planned 1% hike in National Insurance (NI) contributions, which has been branded as a ‘tax on jobs’, and the planned rise in corporation tax, Mandelson’s speech gave no indication that either was on the cards.
He insisted that Labour’s plan to halve the deficit in four years necessitated ‘targeted tax rises’.
The Conservatives have already pledged to cut the small firms rate of corporation tax to 20%; it is currently due to increase from 21% to 22% in 2011.
The Forum of Private Business (FPB) urged the government to make the most of the opportunity to support entrepreneurs in driving the recovery in the Budget.
FPB policy representative Matthew Goodman said: “This Budget is about getting the environment right for businesses to take advantage of the opportunities that 2010 will bring.
“We believe the planned rises in NICs and the small companies’ rate of corporation tax should be scrapped straight away. What’s more, we believe that these are entirely realistic goals. The government does have a huge deficit to pay off, but it won’t accomplish that through imposing ever-higher taxes on an ever-dwindling number of businesses.”
However, although there was no mention of plans to comply with these requests, Mandelson vowed that “next week’s Budget will have small businesses at its heart.”
© Crimson Business Ltd. 2010
