Give us a break, Alistair

Mar 12 2008 by Andrew Mernin, The Journal

BUSINESS organisations throughout the region will be waiting with bated breath today as Chancellor Alistair Darling holds the red box aloft and delivers his first Budget speech.

And on the back of 12 months that has seen one of our biggest corporations fall to its knees and analysts begin warning of an impending recession, today’s speech could make or break the North East’s business climate for the coming year.

Small businesses – which generate around 50% of the UK’s GDP – will be hoping for some much-needed respite from an ever-increasing tax burden and the hindrance of red-tape and bureaucracy.

In the Federation of Small Business’ budget submission, the group described the Government’s approach to taxation of small businesses as “alarmingly disjointed and inconsistent”. John Wright, national chair of the Federation of Small Businesses, said “The Government has beaten small businesses over the head for the last six or seven years.

“If they really want to get more small businesses then you have to give them a break.”

According to the FSB, small businesses want the Budget to bring simplification and stability in a tax system which helps them raise revenue while keeping administrative costs to a minimum. The last 12 months have also been tough for the region’s manufacturing sector with a number of high-profile closures including the Atmel microchip plant in North Tyneside, with the loss of 600 jobs.

Manufacturing organisation EEF Northern has called on the Government to restore its reputation for promoting enterprise by reducing the headline rate of corporation tax to 25% by 2010/11. Director Alan Hall said: “Currently the Government’s strategy for business taxation is muddled, with repeated changes and new measures which have sometimes been reversed rapidly. Business also feels that its priorities for competitiveness, simplicity and predictability are being presented as trade offs.

“As other countries move to improve the competitiveness of their tax systems, manufacturers believe that the UK is heading in the wrong direction. If government is to recover the confidence of business and investors, it needs to set out a more coherent strategy of how it will deliver a more competitive business tax regime.”

And he could have a point since, according to the survey of 285 companies, 54% of companies said that their tax burden had risen in the last five years, with one in eight describing the increase as significant.

For the CBI, one of the key things they are hoping to come out of today’s speech, is the postponement of changes to capital gains tax.

Sarah Green, regional director of CBI North East, said: “The only worthwhile tax changes Mr Darling could make would be to postpone for a year ill-considered and rushed changes to capital gains and non-doms tax, to give the many affected individuals a decent period to plan.

“Beyond that slight relaxation of the fiscal position he has virtually no room for manoeuvre, either to raise taxes to repair the gaping hole in the public finances, or to cut them to stimulate the economy as it faces a sharp slowdown.”