By Daniel Hunter
The Forum of Private Business has written to the Chancellor ahead of next month’s Autumn Statement to outline a five-point plan to help deliver jobs and growth for the UK economy.
The Forum is urging Mr Osborne to concentrate on measures that will help the small business sector flourish by reducing business costs, boosting employment in the private sector, and laying the foundations for sustainable positive economic growth.
Headlining its wish list, the Forum is calling for the Chancellor to make a serious and credible announcement on fuel duty, and for Government to commit to the concept of a fuel duty stabiliser by the end of the current Parliament.
It is also calling for a cap on business rates of 2%. It says with high street retailers across the country never having been under more pressure due to increased competition from online traders and supermarkets, the Chancellor must act on the issue of rates to prevent a full-blown crisis in the retailing sector, while all businesses would benefit from a cap on rates to reduce their outgoings.
The Forum is also calling for a reduction in the costs of employment for business by amending the current National Insurance holiday scheme, and also sets out a case for the Chancellor to abandon plans that would mandate flexible working on all employers, regardless of their size.
In its fifth and final point, the Forum asks for further incentives for private lenders through alternative sources of finance. This would encourage less reliance on mainstream lending, thereby reducing SME addiction to shrinking levels of traditional lending streams, and give businesses the credit required to drive their own growth or even just stay afloat.
“This Autumn Statement is a chance for the Chancellor to make amends for the disappointment that was the March Budget, and really show he understands the challenges the economy faces," The Forum’s Head of Policy, Alex Jackman, said.
“Much of that will be real acknowledgement that Government is doing everything in its power to reduce the cost of doing business for small business.
“While the Government can do little about a stubbornly volatile Eurozone, it does have the capacity to act on a range of issues, primarily fuel duty. Of all the costs to business, fuel hits the largest number of our members. We want to see the Chancellor freezing fuel duty for at least a further six months, and commit to a fair fuel stabiliser before the end of this Parliament.
“It also makes sense to see what January’s OFT report says on its investigation into price fixing in the fuel sector.”
On business rates, Jackman added: “Businesses welcome certainty and the link between business rate increases and the RPI level in the preceding September is useful. However, we are in extraordinary times and the RPI has been running at extremely high rates.
“The problem is compounded by the well-meaning decision to allow businesses to defer 60% of the 2012—13 rate increase over the next two years. Those businesses that took up this option therefore face a twin increase next year and the year after.
“We believe it would be fair for the Government to cap increases in business rates to 2% to ensure better affordability in tough economic times. Business rates are squeezing the life out of retailers, and the sector desperately needs some medicine.”
The Forum has also outlined the need to encourage more small business to make the jump from sole trader to employer.
“The Chancellor can do this by amending the National Insurance holidays,” said Jackman. “More small businesses need to be incentivised to employ. We think the current offering is too complicated, and the take-up has been far less than predicted.
“Rather than applying £5,000 for each of the first 10 employees hired in the first 12 months, the scheme should apply £5,000 for each of the first two new members of staff hired by a micro business in the UK, for each of their first two years of employment,” he said.
Micro businesses have to this point been excluded from the scheme unless they are a start-up. Extending the scheme for two years but for fewer employees means businesses would be far more likely to recognise the benefits of those new employees and continue employment at the incentive’s end.
Calling on the Chancellor to abandon plans to mandate flexible working on all employers, Jackman commented: “The cost to businesses of auto-enrolling their staff over the next three years will be sizeable, so we don’t think it’s sensible to add another cost tier to business during this same time frame in the current economic climate,” said Jackman.
“Many businesses across the country already allow employees the option of flexible working where it works for their firm. They are certainly not against such practices if the business can accommodate it. Legislating in an area that works perfectly well informally will create a bureaucratic process.
“Employers will need to jump through hoops in order to reach the same decisions they can currently make without such processes, but with an added threat of being taken to a tribunal. Instead, the Government should focus on extolling the benefits of flexible working for businesses, rather than forcing them through a statutory tick-box exercise.”
In its final recommendation, the Forum proposes further incentives for private lenders through alternative sources of finance. It says tight credit restrictions have meant businesses cannot always access finance to deal with increased costs.
Says Jackman: “Our own research shows 41% of Forum members feel they now have less leeway in coping with business costs than last year. Further, our Cost of Doing Business report showed 4 in 5 expect prices to continue to increase next year, with 14% expecting a significant increase.
“In a post-Merlin world, all reasonable and proven mechanisms should be equally supported and promoted to help firms battle through the lean times.”
The Forum is calling for a reduction to 0% on the tax on interest received during the lifetime of a loan, instead of the top tax rate, providing the loan is still outstanding after three years. It would support additional tax relief if a business fails before the loan is repaid — the lender could claw back up to 50% income tax relief at the top rate on money lost if the firm fails, in addition to tax saved when the loan was issued.
The Forum believes that complete tax relief on the interest received in lending to small businesses would work effectively to stimulate lending to small businesses at a relatively low cost to the Government.
“We estimate the cost to the Treasury of removing tax on interest completely would be just £3.6 million in every billion invested via private lending initiatives. For such little cost this has to be explored,” said Jackman.
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