Tax cuts call for Budget

Nov 21 2008 by Jez Davison, Evening Gazette

NORTH East businesses are urging Alistair Darling to put tax and VAT cuts at the heart of his eagerly-awaited Pre-Budget statement on Monday.

The Chancellor is widely expected to announce a multi-billion pound package of tax cuts in a bid to stimulate the economy.

But with Government borrowing rising by £1.4bn last month, local firms warned business may pay later for short-term concessions granted next week.

Dave Nicholson, MD of Billingham haulage firm Nicholsons Transport, said: “If I had a choice I’d cut VAT permanently. We’re living for the now - which is great - but with Government borrowing going up, it’s likely we will have to pay it all back later.”

Michelle Taylor, of Hartlepool fashion firm Tallulah Love, said temporary measures would not be in the best interests of local businesses.

She said: “Tax cuts would be fantastic but not if they lead to tax rises later down the line. People would get used to the lower rate and wouldn’t be too happy if it’s taken away.”

Martyn Pellew, group development director at PD Ports, said tax cuts on vehicles would put more money in consumers’ back pockets. He also urged the Government to speed up planning processes on vital rail infrastructure projects and introduce training schemes to get long-term unemployed back into work.

David Foreman, of Forefit Structural Glass Solutions, said he would welcome more flexibility in the payment of VAT and corporation tax.

“It’s hard to get money into the business when people are withholding payments but you still have to pay VAT and corporation tax on time.”

Company cashflow problems have soared due to banks’ reticence to lend money following the breakdown of the global financial system. Forty-three per cent of members on the Forum of Private Business’ economic downturn panel said borrowing facilities were “worse than expected” and 47% reported an increase in banking fees.

Business leaders say the banks, buoyed by the Government’s multi-billion pound bail-out package, should be releasing funds now to help struggling homeowners and businesses.

Paul Mooney, chief economist at regional development agency One North East, said “unblocking the flow of credit to businesses” should be a key priority for ministers.

He said “We need to ensure that businesses have the means to grow and create jobs and wealth for the local economy.”

Mike Parker, of communications agency Mike Parker Media Ltd - which works with Tees Valley clients Clive Owen & Co and AV Dawson - believes plans to inject more liquidity into the market would “instill much-needed confidence back into the business community”. He also called for a radical simplification of existing regulation, which “does little to promote entrepreneurship in the UK”.

Other items on the pre-budget wish list are:

Concessions on empty commercial property rates, which are forcing some Tees Valley busines- ses to demolish buildings.

Direct Government lending to small businesses in the absence of credit from banks.

Tax credits for companies that implement carbon- friendly policies.

A 1% cut in income tax and national insurance.

A permanent raising of the stamp duty threshold to £175,000.