Pre-Budget Report – a summary for businesses
Alistair Darling
Summary
There has been a mixed reaction from the business community to Alistair Darling’s first
Pre-Budget Report* and Comprehensive Spending Review** announced yesterday to the House of Commons.
The main criticism is directed at changes to the capital gains tax, from a tapered relief
scheme to a flat 18%, which the Treasury claims will establish a fairer, more sustainable,
straightforward and internationally competitive system. Both the Confederation for British Industry
(CBI) and the Federation of Small Businesses (FSB) argue that this will hit SMEs in the pocket and
could discourage investment in start-up and growing businesses.
However, both organisations have welcomed the Chancellor’s commitment to simplifying business
tax, and in investing in the UK’s transport infrastructure.
* Pre-Budget Report - The Pre-Budget Report (PBR) is delivered by the Chancellor to the
House of Commons in the autumn. It provides a progress report on what has been achieved so far,
gives an update of the state of the economy and public finances, and sets out the direction of
government policy in the run up to the spring Budget.
* ** The CSR assesses government investments and public service reforms since 1998 and
identifies plans to meet the challenges facing Britain over the next 10 years. It sets government
priorities for the longer-term and the funding for each government department for the three year
period from April 2008 to March 2011.
Key Points for SMEs
Alistair Darling announced the following measures that will affect businesses:
* Simplifying the tax system
* Simplifying business support to reduce confusion and improve the quality, effectiveness
and efficiency of schemes.
* Increasing spending by the Department for Innovation, Universities and Skills on higher
education and skills, developing a strong partnership with employers and individuals to deliver
higher skills.
* Increasing public investment in the science base to ensure the UK’s continued success in
generating new ideas and using them in wealth creation.
* Increasing the Department for Transport’s programme budget to continue the renewal of the
UK’s transport infrastructure.
* Supporting the private equity industry’s moves to increase transparency and a number of
measures to ensure that tax arrangements are sustainable and appropriate.
* Allowing local authorities to invest in economic development by levying a local business
rate supplement and focusing the strategic role for the Regional Development Agencies on economic
growth.
For more details on the above, visit
http://www.hm-treasury.gov.uk/pbr_report and click on Chapter 4: Sustainable
growth and prosperity.
In addition, the Chancellor announced the following measures:
* Increasing the Department for Environment, Food and Rural Affairs’ budget, which includes
increasing funding for flood and coastal erosion risk management.
* Creating an environmental transformation fund to support the demonstration and deployment
of new energy and efficiency technologies in the UK.
* Replacing air passenger duty with a duty payable per plane rather than per passenger.
For more details on the above, visit
http://www.hm-treasury.gov.uk/pbr_report and click on Chapter 7: A more secure,
fair, and environmentally sustainable world
Reactions from Business Organisations
CBI (Confederation of British Industry)
"The CBI was hoping for a statement for enterprise with encouragement for small businesses,
which were hit by tax increases in the last Budget," said John Cridland, Deputy
Director-General of the CBI.There was no such statement and many small businesses will be hit again
by the increase in the Capital Gains Tax rate.
Regarding the introduction of a supplementary business rate, he said:
"The government has recognised that business is not prepared to give local government carte
blanche to tax firms rather than voters. But giving business a vote must be a non-negotiable part
of the package on all major projects."
He added:
"The Chancellor’s commitment to business tax simplification is welcome, but business will want
to see action as well as words."
"The priority given to transport investment for the long term is very welcome. Together with
the decision to build Crossrail, this is a move in the right direction. We also welcome the
government’s commitment to supporting level three skills."
For more information on the views of the CBI, visit www.cbi.org.uk/news
FSB (Federation of Small Businesses)
The FSB has criticised Alistair Darling for adding to the tax burden of small businesses.
Changes to capital gains tax will hit many of the UK’s 4.5 million small businesses that are still
reeling from the increases in corporation tax announced in the last Budget. But the FSB welcomes
plans to simplify small business taxation and statements on encouraging skills and innovation and
supporting intellectual property.
"The UK’s small business community, which contributes over half of the country’s GDP, will not
be helped by a less generous capital gains tax scheme," said John Walker, FSB policy chairman.
"There were some welcome announcements about simplifying the tax system, which is long overdue.
The test now will be for it to actually happen in practice."
"Overall, though, this PBR look set to increase the financial burdens on small businesses at
a time when they are contributing more than ever to the UK economy."
For more information on the views of the FSB, visit
www.fsb.org.uk/news.asp
For more information on business taxes and to find out if they apply to your business,
click here
Pre-Budget Report Alert