By Daniel Hunter

The Forum of Private Business has urged the Chancellor to scrap a planned rise in business rates as part of its annual Budget submission.

The Forum makes the call after its own research recently identified rates as the least favourite of all business taxes, with 94% of firms believing they have spiralled too high.

The Forum blames the tax’s link with inflation — which last year saw a huge 5.6% hike on bills — and has asked the Chancellor to consider capping any subsequent rises for the following two years at 2%.

With traditional lending remaining weak, the employer support organisation’s annual submission to Number 11 has also called for government to further incentivise private lending through alternate sources of finance, and also to look at piloting neutral, shared bank branches.

The Forum’s Head of Policy, Alex Jackman, said: “Reducing the cost of doing business is a key way to improve cash flow for small businesses. Business rates are one of the major costs faced by British businesses and although the certainty created by linking business rate increases to RPI level from the preceding September is welcome, in current conditions inflation remains high and has had a disproportionate effect on increases.

“RPI has been running at an extremely high rate and as a consequence businesses were faced with a 4.6% increase in 2011, a 5.6% increase in 2012 — the highest for 20 years — and now a proposed 2.6% increase this April.

“While we welcomed the deferral of up to 60% of the 2012/13 increase over a two-year period and the very helpful Small Business Rate Relief, this exacerbates the rise faced by businesses this year.

“By scrapping business rate rises this April and capping them at 2% over the following 2 years, the government can help with both cash flow and certainty for financial planning. It would also encourage businesses to consider local council proposals on supplementary business rates with more open minds.”

Elsewhere in its submission, the Forum asks government to place a greater focus on improving credit to those firms who need it most, by improving traditional lending routes for SMEs, as well as encouraging new forms of lending.

It believes government must look again at incentivising private lending, and points to its own member research which showed that a growing number of firms are of the opinion they will have less leeway in coping with rising business costs this year — 41% — through subdued lending. For these reasons the Forum says the government should reconsider its opposition to tax breaks for lending through alternative platforms to help deliver quicker and better access to finance for small business.

“To date the government has shown a reluctance to offer tax breaks to those lending through peer-to-peer platforms, citing the rapid growth already apparent in the sector,” continued Jackman.

“However, Funding Circle estimates over the next three years around £2billion of additional lending could be channelled to small business customers if tax relief incentives were extended. And the more investors that use the new platforms the lower the cost of interest can be. By investing in scalable peer-to-peer platforms the government can support more choice and lower costs for business finance.”

“The Chancellor has some tough decision to make in his next Budget. But we think he must seriously look at new and creative ways to get lending moving again, if not from the banks then from new sources.

“This has to be a Budget with a focus on small business growth. This is why we are also urging the government as part of our submission to move ahead at full speed with cutting business red tape.

“While their efforts so far have been welcome, members tell us they are yet to see any real difference on the ground, and we’ve actually got some big changes due to come in to effect. Real Time Information comes into force in just a few weeks time, there’s pensions auto-enrolment next year, and proposals to extend flexible working rights for all employees are currently on the table.”

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