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Budget 2002 – responses


CBI Director-General Digby Jones said: "The Chancellor has given with one hand but taken with the other. Companies will be delighted by measures to boost innovation and entrepreneurship. But there will be deep dismay at the net increase of some £2.5 billion in the cost of doing business in Britain.

"We are worried that he is now imposing a business tax burden that impacts directly on the cost of employing people at a time when UK competitiveness is being put to the test. An increase in employers' NIC's impacts on every business of every size regardless of whether or not they are making profits.

However, he welcomed the tax credits for research and development, and the enterprise agenda: "The Chancellor has left business in no doubt that he is committed to encouraging enterprise. The tax improvements, including the red tape burden, are welcome. We especially welcome the financial help for small businesses gaining accreditation as Investors in People."

The TUC welcomed the budget: "This is an honest and intelligent budget, which gets the balance broadly right... In the best sense of the word, this is a highly politcal budget. It recognises the common interests of core supporters and middle England, it helps tackle poverty and gives the government clear themes for the rest of this term... The training tax credit pilots are a welcome and innovative step in tacking the underlying causes of Britain’s skills gap. But if the credits are to work they must be backed by statutory rights for workers to take time off for them to train."

"We welcome the increase in the basic state pension this year and the commitment to increase pensions by at least 2.5 per cent per annum in the future. The Pension Credit is also a welcome step forward, provided take-up is ensured. But the government should recognise, particularly with so many employers scrapping final salary schemes, that a state retirement pension linked to earnings must continue to provide the foundation for security in retirement. The government must also act to make employers contribute to staff pensions."

And on Tax Credits, the TUC said: "The new tax credits are welcome. They help make work pay and tackle child poverty. But the Chancellor will need to continue to be generous if the government is to meet its poverty targets."

The Institute of Directors applauded the Chancellor's aims, said that he is taking a big gamble, both on reforming public services (especially health) and on economic growth:
"The Budget did however include several worthwhile tax measures:
The reductions in corporation tax for small companies will give a welcome, if modest, boost.
Confirmation of the exemption for companies' gains on substantial shareholdings will make the UK a more attractive location for businesses, although the new rules for branches of foreign companies will reduce the beneficial impact.
The new rules on intangible assets will be very important in an economy where intellectual property is an increasingly significant asset.
The simplified VAT regime will help a large number of the smallest businesses. The IoD is pleased that the Chancellor is already considering an extension to a wider range of businesses, as the IoD has recommended.
The announcement that proposals in Patrick Carter's Review of Payroll Services are to be taken forward demonstrates a commitment to reducing administrative burdens, although policy changes are also needed."

The British Chambers of Commerce were more critical. David Lennan, Director General, said:

"After several steps forward this is a Budget that has reached a plateau in driving business competitiveness and prospects forward. Employers do not draw on the National Health Service and should not be asked to pay for its improvements. A cut in the small companies corporation tax will not compensate for the higher national insurance contributions small businesses are being forced to make. Raising national insurance rates make a mockery of the distinction between our tax and national insurance. It is high time that one of our political parties stopped this farce and had the courage to merge the two systems, saving our small businesses billions of pounds a year."

On Patrick Carter Payroll Review:
"This Review appears to have been driven more by cutting costs for Government than by genuine help and simplification for small businesses. The Government should solely use incentives, which if there are sufficient will meet its objective, rather than setting some arbitrary cut-off date."

On Training Incentives:
"We support the additional money being found to promote the Investors in People Standard, which helps small businesses raise the quality of their training efforts. A training tax credit will provide incentive for small employers to increase their expenditure on training activities. If we are to close the productivity gap with some of our major rival nations, the Government must be bolder in the level of skills it will incentivise and must act with speed to get the tax credit in place. We reject the ‘carrot’ and ‘stick’ approach of also introducing a statutory right to time-off for training, believing that small employers will make the time if the incentive is sufficient and that the training an employee receives is related to their job."

What did you think of the budget, and what would you like to have seen in it? Post your comments below, or vote in our poll.


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