Chancellor's message to Chambers of Commerce

Chancellor Gordon Brown sang the praises of the small business community when he addressed the annual British Chambers of Commerce's conference - a week before he was due to make his Budget address, which, many small businesses fear, may hold unpleasant surprises.

Mr Brown began by praising the contribution the businessmen and women make to the success of the British economy. He told the audience: "Your dynamism, your achievements, your success for Britain is evidence that Britain truly is an enterprising nation.

"You are the wealth creators, the men and women who make our nation more prosperous. And with over 135,000 businesses as members, the British Chambers of Commerce are a powerful voice, championing the cause of businesses across government and around the country."

Stability

The first tenet of his speech was to set the agenda for greater economic co-operation between Europe and America, against the back-drop of citing the efforts of the troops in the Gulf. He also acknowledged the difficulties that the resulting uncertainty causes for all types and sizes of business operating in an environment where no-one can be insulated from the ups and downs of the world economy.

His 'macro' picture was themed around stability, flexibility and growth - perhaps indicating some of the priorities for next week's Budget.

Mr Brown moved on to the Government's achievements responding to requests from business itself.

He told the members of the BCC: "Just as you asked us to give priority to stability and the environment for job creation, so you have asked us to remove the barriers to growth and prosperity and to tackle bureaucracy and regulation.

"You asked us to look at small business corporation tax so that we could reward entrepreneurship and encourage new investment. So we cut small business corporation tax from 23p to 20p and then to 19p last year and then at the same time we abolished the 10p tax rate and ensured that the first ten thousand pounds of profits are taxed at zero.

"You asked us to look at capital gains tax which had for years been set at 40 per cent and discouraged new investment.

"Amidst all our other priorities - the health service, schools, transport, policing - we decided that it was right to reduce capital gains tax from 40p to 10p for business investments held for two years or more and make it easier for men and women selling their business on retirement to receive more of the benefit of their hard work.

"You asked us to look at the complexity of administering VAT. So instead of having to account for every transaction we now have an automatic VAT calculation for small businesses and we are lifting the burden of VAT red tape off the shoulders of nearly half a million companies, enabling each of them to save up to £1,000 in compliance costs - with another 200,000 firms due to benefit next month.

"And we are publishing a new, simple and straightforward guide to setting up in business -- giving entrepreneurs the advice and support they need as they take their first steps.

"Do you remember when back in 1991 John Major complained that "you need 28 separate licenses, certificates and registrations just to start a business"?

"That's why, taking your advice, we've reduced the cost and time it takes to form a business so that Britain is now best in Europe for quick and efficient business start ups.

"Where in the rest of Europe it takes around four weeks and an average of £600 in Red Tape costs: in Britain just one week and only £30 in administration costs.

"And we need to do more. That's why we're not only assessing whether each regulation, past and present, is really necessary and why we're urging Brussels to do the same.

"You asked us also to look at how banks and financial institutions meet the needs of small business. That's why we accepted the recommendations of the Competition Commission requiring the big four banks to offer you either interest or free banking and that's why we've set up the Phoenix Fund, regional venture capital funds and have now extended the Small Business Loan Guarantee Scheme to include access to finance for a wider range of firms including catering, retail and vehicle repairs.

"And here too we'll continue to listen and do more.

"We heard you when you called for tax reliefs to promote research and development - help to turn your ideas into new business, jobs and profits. And so we have amongst the most generous system of R and D credits in Europe. And here again we want to do more.

"And we heard you when you called for incentives for investment so we have made capital allowances for small and medium sized businesses permanent with a 100 per cent allowance for investment in it.

"And when you, rightly, have raised the question of the national insurance tax rise, let me say that there would have been no need for any tax rise had it not been for the rising costs in every part of the world - Europe, America, Japan and Asia, of new life-saving health technologies and the urgent need for greater capacity in British health care."

Enterprise

Having moved through health care, the global economy and regional development, the Chancellor then addressed enterprise.

He said: "In the UK just five per cent of adults think of starting a business, in the United States it is 11 per cent, so we have a long way to go.

"And there are also large variations in the rates of business creation between areas of the UK. When some areas have ten times the number of start-ups than others we know the effect of economic activity, confidence, jobs and prosperity.

"Small business corporation tax has been cut everywhere. But to remove the barriers preventing firms from starting up and growing in our most deprived communities, we have designated 2000 new Enterprise Areas with new incentives.

"I can tell you that here we are cutting the cost of starting up, investing, employing, training, managing the payroll."

The audience comprised businesses of all sizes from around the UK and the Chancellor's final part of his presentation was to focus on how businessmen and women in the regions could share their knowledge, creativity and innovation with their local communities, particularly with schools and younger people.

BCC reaction

However, the BCC gave a hot and cold reaction to his speech, BCC's President Isabella Moore said: "We very much welcome the Chancellor's desire to increase flexibility at EU, national, regional and local level, particularly in regeneration and New Deal funding. Chambers are the key partners to the Government's work at all of these levels and we look forward to playing the key role for business as these proposals are taken forward.

"Furthermore, the desire of the Government to remove trans Atlantic trade barriers between the EU and the US is a boost to business and we hope that the Government will resist less flexible approaches from other EU partners.

"However, we are disappointed by the Chancellor's failure to address the points in our productivity survey. These are the key issues for business and they must be addressed for the economic well being of the UK. We hope that he will have time to study the survey in more depth, so that he can implement its recommendations in his Budget.

"We accept that the NHS is in need of extra funding. However, the lack of reform in the NHS to go with all the extra money is troubling. Business could possibly accept the rise in National Insurance Contributions if the Government ran the NHS in a more business-like manner to ensure that the extra funding is not wasted. We are not confident that this is the case at present."

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