‘Give us breathing space’ – businesses message to the Chancellor

The plea to Chancellor John Healey from business as he prepares his first Budget later this month is clear – ‘give us some breathing space’.

Businesses of all sizes, hit by employer National Insurance hikes, minimum wage increases and a raft of new workers’ rights under the Labour government – are praying they will not have to face further punishment.

The Healey Budget will be delivered against a backdrop of business confidence plunging to a 17-month low, growing concerns over rising energy costs, global political uncertainty and volatile bond markets.

There is a nervousness around the possibility of more pain being delivered and with little wonder. Policy related operating costs for a typical SME have increased by more than 70 per cent in 10 years, according to the British Chambers of Commerce (BCC).

In the run-up to the Chancellor’s statement, business organisations, including the BCC and the Federation of Small Businesses (FSB) have all stressed the need for this ‘breathing space’.

It’s a message also being delivered by businesses individually. Anna Blackburn, managing director of Lancashire based national jewellery retailer Beaverbrooks, said in a recent national newspaper interview: “The government can’t increase business costs much more. Give business a bit of a break and stimulate some growth and confidence.”

The big question is, what can the Chancellor do to make that happen when he has such little room for manoeuvre and a diminishing fiscal buffer?

Things may be tight, but he does have some options. For instance, raising the Small Business Rates Relief from £12,000 to £25,000 would remove 250,000 businesses from paying rates.

The FSB wants to see reduced employment taxes on small firms and a Statutory Sick Pay rebate introduced for small employers, to mitigate against rising employment costs.

Meanwhile, raising the VAT registration threshold to £100,000 has been on the pre-Budget wish-list for some years now. Again, it would be a positive move aimed at stimulating growth, prompting more businesses to move forward with growth plans.

Another widely welcomed move would be scrapping the 20 per cent inheritance tax on agricultural and business property or raising the threshold at which people start paying it.

Help for first time buyers would benefit the housing market and it has already been revealed that details of a new equity loan scheme – Your First Home – to support more people into home ownership in England will be confirmed in the Budget speech.

There is some evidence that the Chancellor is listening to the many calls for breathing space. Recent media reports suggest he is looking to focus his statement on targeted help, both for businesses and households, rather than hiking taxes.

There has been some speculation that Capital Gains Tax (CGT) could be increased and aligned with income tax, a move that would likely have a negative impact on business decisions around investments.

And, as it appears a mantra of ‘do no harm’ is doing the rounds in government circles, with the aim of not undermining fragile business confidence, that decision may well not happen, or be delayed.

If it is the case, however welcome the Chancellor’s approach to his October 28 statement may be, there is an element of ‘kicking the can down the road’ to it.

Tough decisions over funding the government’s priorities over the next three years, including social care, will have to be made at some stage. And that is not even counting plugging the financial hole in defence spending and moving it towards the target of 3.5 per cent of GDP by 2035.

So, businesses may be spared pain when the Chancellor stands up in the Commons and there may even be some measures that will be welcomed and will deliver that ‘breathing space’ being called for.

The big decisions may be parked for now. How long they remain there is another question. Difficult choices can’t be avoided for ever.

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