Oct 2008 21

Doing the right thing regardless of the EU2

Cameron and Osborne’s latest announcement on the economic crisis is a good start, but they must still go further for it to be of meaningful benefit. The idea is to offer small businesses a VAT deferral, allowing them to pay their VAT six months later than expected. Some have assumed this is six months off paying VAT, but it isn’t – small businesses will still pay the same, they’ll just pay it in April rather than November.

Any respite is, of course welcome, but this doesn’t even in the medium term mean firms will pay less tax. They still face the same burdens, and there is no real prospect of the economic crisis having just blown over in six months time. A VAT cut, and/or serious reductions in other taxes would are needed to keep businesses afloat, keep people in work and bolster the economy. The seven point "Backing British Business" manifesto launched today by The Sun contains several of the more radical steps that businesses need sooner rather than later. It’s urgent that we offer swingeing reductions in company tax burdens – not just the same burden in a few months time.

Over at the Spectator Coffee House, Fraser Nelson raises another interesting angle of the VAT issue. As VAT changes can only be introduced with unanimous agreement of all member states at EU level, can Cameron really do this if he is elected? The answer is that of course he can – the EU may not like it, but a democratically elected Government of the UK has the final power to control our affairs.

Furthermore, if he was to go ahead and provide tax cuts regardless of what the EU thinks, does anyone really think that it would be strategically or electorally damaging? In an economic crisis, people want tax cuts to help the economy and they’d rather see their Government bring them in in defiance of the EU than knuckle down and let the EU refuse to let us do what’s needed to help the economy.

A VAT holiday is a good start, but let’s have corporation tax cuts, VAT reductions and a simplification of the arduous rules businesses have to obey. If the EU don’t like any of that, I’d hope any Government would do what was best for Britain regardless of how many hurt feelings there might be in Brussels.

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  • john graham

    As I own and run an SME ( for 35 years) I am highly qualified to speak from experience. Its simple- I don’t need Mandelson or a raft of “help” all I actually need is less tax and less grand titled “business development officers” (if they were any good they would be running a business and generating wealth/tax revenue and jobs NOT costing tax and wasting my time) tax is the single biggest cost that any business faces combined with the cost of administering it. Less state drones- less tax- its simple.

  • http://profile.typekey.com/DonaldG/ Don G

    All the money spent on centralised procurement agencies surely is in direct opposition to the government’s “targets” for helping SMEs? These organisations take more and more public contracts out of the reach of SMEs and local businesses by aggregating them into bigger contracts. Then they are awarded to national/multi-national companies who whisk the money straight out of the local economy. In this case, a lower invoice cost equals higher total economic cost once all the DSS benefits to unemployed local business owners, and grants to start new companies again, are taken into account.
    Cameron/Osborne should promise to abandon all centralised procurement agencies and, if they’ve not got the backbone to pay off the staff, at least spread them out into the local councils, health boards etc. with the remit to keep trade local by tendering smaller contracts where possible.