Brown plans quiet life before election

Link: Brown extends help to small businesses

Small business owners have taken a battering this year as they have struggled to unravel themselves from the growing burden of red tape. But good news could be around the corner in the 2 December pre-Budget report.

Gordon Brown is expected to unveil a paper on how to nurture entrepreneurial spirit within small businesses by adjusting the tax system. There will be no definitive details on how this will be done, say experts, but it’s nonetheless a positive sign.

‘There will be suggestions of a future framework for change, but the discussion paper will mostly ask for comments on what is wrong and how to change it,’ says Francesca Lagerberg, national tax director at Smith & Williamson.

The chancellor has already pledged to tackle red tape and over-regulation of the audit function during a speech at the Confederation of British Industry conference last week.

‘In the pre-Budget report we will do more to reduce regulation in Britain in the area of inspection, audit and enforcement regimes,’ the chancellor said, surprisingly.

And, at the Enterprising Britain Policy summit this week, Brown said he would use the PBR to ‘remove the tax and regulatory barriers to enterprise’. He used the example of barriers that block university spin-off companies from turning research work into successful businesses.

A further fillip for employers could also come in the guise of an announcement on adjusting the ‘painful’ administration system surrounding working tax credits, which have to be paid through the company payroll. The system has caused innumerable headaches, confusion and problems for finance staff and company bosses.

‘It’s a pain – the administration, the hassle,’ explains Lagerberg. ‘The government will give us a clue as to how it will change and what to look out for.’

That aside, predictions indicate that this year’s speech will be more of a ‘damp squib’ than a heart-warmer. As one commentator argues, it would be ‘a brave chancellor who put up taxes’ just months before a predicted May 2005 general election.

John Whiting, tax partner at PricewaterhouseCoopers, adds: ‘If an election really is in the offing, it seems more likely that any tax reform ideas will be in the manifesto rather than the pre-Budget report.’

That is, after all, what this preBudget report is really all about – the next general election. But with the Tories breathing down Brown’s neck over increased public spending and high taxes, the chancellor will have to use all his powers of persuasion, not prudence, to ensure his offerings bring good news for at least some of the voters.

Mike Warburton, senior tax partner at Grant Thornton, says: ‘Brown is not going to make a tax give-away. Tax will be neutral. But he might give a bit of a fillip to help the less well off, with things that won’t cost much.’

Warburton suggests that Brown could freeze duty on beer ‘to show that he cares’.

Forecasts of a lack of any major announcements in this pre-Budget report will be broadly welcomed. Most finance professionals are still digesting the record-breaking size of the Finance Act 2004 and coming to terms with the far-reaching changes it brought. So no news in this case may just prove to be good news.