Government urged to show commitment to small firms in Pre-Budget Report

"The FPB, which has set up an economic downturn member panel in order to gauge the views of its members and communicate them to decision-makers, wants the Government to stick by its commitment to monitor the banks' lending to small businesses," said Phil Orford, the organisation's Chief Executive. "We have submitted a petition to the 10 Downing Street website to this end, and, along with tackling the burden of tax and regulation, this forms a central component of our submission to the Government's Pre-Budget Report. It is important that the correct measures are put in place to support both small firms and the economy as a whole."

The FPB is backing schemes to ease VAT payments for small firms, and arguing for more to be able to benefit from the Cash Accounting Scheme (CAS), which allows businesses to pay VAT when they have been paid, rather than on unpaid invoices. This would help small businesses to combat the scourge of late payment, which significantly impacts on cash flow.

In its latest Referendum survey, FPB members voted tax and regulation as the biggest threats to their businesses. The top five measures members would like to see included in the 2009 Budget were: simplifying or limiting health and safety regulations (74%), slashing red tape requirements (74%), reduction of Fuel Excise Duty (60%), cutting corporation tax to 20p (58%) and combining PAYE with National Insurance (41%).

Following the research, the FPB is also calling for:

- a reduction in small companies' rate of corporation tax to 20%
- automatic enrolment for Small Business Rate Relief
- an inflation reprieve for Small Business Rate Relief
- continued support for regulatory reform

Corporation tax

The FPB is particularly concerned that, despite the serious impact of the economic downturn and the credit crunch, the Government remains intent on increasing the lower rate of corporation tax to 22% by April 2009. Conversely, the higher rate, paid by bigger businesses, is being cut from 30% to 28%. The Chancellor of the Exchequer, the Rt Hon Alistair Darling, should reduce the lower rate to 20% and keep it at this level beyond the 2009–2010 fiscal year.

Case study – the bacon slicer

 "Given the current economic climate, the Government should be doing all it can to help, particularly to help smaller businesses, which are the mainstay of the economy," said Matt Hardman, of The Bacon Factory, a bacon slicing company in Bury. "A cut in corporation tax would provide a beneficial boost to these companies, and a big boost to the economy."

Small Business Rate Relief (SBRR)

The FPB is calling for SBRR to be applied automatically so that small businesses which are eligible but which do not claim it, often through a lack of awareness of the deadline for claiming, can benefit from money already set aside to support small firms. Currently £200 million of SBRR goes unclaimed each year.

In addition, non-domestic rates should be exempt from increases incurred because of inflation until after the revaluation of premises in 2010. This would fix the small business rate multiplier at 45.8 pence for the whole of 2009 and the start of 2010, helping to preserve cash flow in the longer term and encouraging growth over the next two years.

Case study – the haulage company

"The Government could also do more to promote the scheme –- it's interesting how, when they want money off you, they make it clear what you need to do, but when the boot is on the other foot, it's impossible to get hold of them," said the FPB's member Tim Rhodes, who is the Managing Director of Skypark Freight Ltd in Liverpool.

Regulatory reform

Finally, continued support for regulatory reform, particularly in the areas of health and safety and employment law, through the Government's Better Regulation Executive (BRE) and its move to introduce regulatory budgets on individual departments, would be better for businesses and help the UK's economy recover more quickly.

Case study – the hairdresser

FPB member Richard Allen is the owner of a hairdressing salon based in Canterbury. He is struggling to run his business due to existing regulatory burdens and their associated costs.

"The whole thing is ludicrous. At the moment, I'm having to deal with employment legislation," said Mr Allen. "Due to the costs of the burden of red tape, we have had to reduce the number of staff we employ; we've gone from having 14 to 8 employees."