Tuesday, 10 January 2012

Changing Tack

The economic prospects are bleak, and redundancies, unemployment and short-time working are all likely to increase. The government has no growth strategy, but is inflicting a series of stealth taxes.

Small firms need help to survive and to grow. Whilst confidence in the economic prospects remains low, they will be nervous and reluctant to invest more. Yet they could make an important contribution to the immediate jobs’ crisis and provide the potential to build sustainable economic growth.

New figures, slipped out by the Treasury last week, reveal that, in its first year of operation, the government’s flagship national insurance holiday for new businesses has supported just 2.5 per cent of the businesses promised help by the Chancellor in his first Budget. The scheme, which has a budget of almost £1 billion, is also set to cost more in administration and red tape than it has so far given in support for new businesses.

In his first Budget George Osborne said his policy would benefit 400,000 businesses but the Treasury’s own figures show that just over 10,000 firms received support from the scheme between September 2010 and November 2011. Just £6 million was paid out to small firms to support 12,400 jobs in the period for which figures are available, but the Treasury estimates that the administration costs of the scheme will be double that at around £12 million.
This is ridiculous. A scheme which ends up supporting just one in forty businesses of those promised help is clearly not working.

The government should now use the hundreds of millions of pounds of unspent money allocated to the scheme to extend the tax break to all existing small firms, with fewer than 10 employees, who take on extra workers. The national insurance tax break would apply for a year for each additional employee taken on.

This could be one component of a serious economic growth strategy to benefit us all.