Newsletter - March 2008

In this edition:

• Policing illegal workers ‘not a job for small business owners’
• 2008 Budget will ‘hit small businesses hard’, warns FPB
• New service to enable same-day cash transfers
• Darling poised for ‘green Budget'
• Tax ‘revamp' needed to help economy prosper, argues CBI
• Minimum Wage set to rise in October
• 2008 Budget: Darling's design for a ‘greener' future
• 2008 Budget Report: the political reaction
• 2008 Budget Report: the business reaction
• 2008 Budget Report: Darling downgrades economic growth forecasts
• Business welcomes Enterprise White Paper
• UK credit card losses pushed up by overseas fraud
• Businesses should ‘do more' to reduce employee absence

Policing illegal workers ‘not a job for small business owners’

A leading business organisation has criticised the new rules on employing foreign workers, claiming that small business owners cannot be expected to act as ‘immigration officers.’

The Federation of Small Businesses (FSB), which has over 210,000 members, has publicly condemned the complexity of the new legislation and the Government’s ‘failure to publicise’ the reforms.

From 29 February 2008 employers who negligently hire illegal workers may be charged a £10,000 on the spot penalty, whilst businesses that knowingly take on illegal migrants could incur an unlimited fine and be sent to prison for two years.

The FSB claims the new rules will impose ‘unrealistic expectations’ and ‘draconian fines’ on employers.

‘It is totally unfair to expect small business owners to act as immigration officers and then threaten them with huge fines if they slip up,’ said FSB employment chairman, Alan Tyrrell.

He added: ‘Expecting small employers to understand and implement complicated immigration rules is ludicrous. The guidance notes alone for this piece of legislation run to nearly thirty pages.’

Outlining the changes last year, Home Secretary Jacqui Smith, said the civil penalties would provide a ‘more effective way of dealing with employers who use slipshod or exploitative recruitment methods.’

The new tough penalties are part of a wider Government shake-up of British immigration law. An Australian-style points system will also be introduced in an effort to restrict immigrants to only those with skills that will benefit the UK economy.

Top

2008 Budget will ‘hit small businesses hard’, warns FPB

The 2008 Budget will not grant any favours to small enterprises, according to the Forum of Private Business (FPB).

The lobby group fears that smaller businesses will be forced to pay for the tax breaks it predicts the Government will deal out to big companies.

The warning comes as Chancellor Alistair Darling gears up to deliver his first and much anticipated Budget on 12 March.

‘The FPB is urging the Chancellor to radically rethink many of his ideas, in particular his tax plans, which specifically disadvantage smaller businesses,’ said the FPB’s policy representative, Matt Goodman.

‘Issues such as excessive legislation, unfair competition and the dearth in work-ready, skilled employees leaving education must also be addressed as a matter of priority,’ he added.

The FPB is also calling on the Chancellor to reduce employers’ national insurance contributions (NICs). From 30 October 2008 the current NI exemption for holiday pay will be withdrawn.

The business organisation is also urging the Government to address the ‘unfair’ monopoly of large supermarket chains in the grocery sector and review the proposed increase in fuel prices and introduction of national road pricing schemes.

For all the latest Budget news and information, make sure you visit our website regularly - we will be publishing a comprehensive summary of the announcements.

Top

New service to enable same-day cash transfers

Consumers who make cash transfers over the phone or via the internet will soon benefit from a faster payment service, according to the industry body Apacs.

From 27 May 2008 such one-off transactions made across the UK will take just one day to process rather than the current three.

The new payment infrastructure has cost the banking sector hundreds of millions of pounds to develop and implement, said a spokesperson for Apacs.

‘It will be a 24-hour a day, seven day a week service and transfers will happen immediately,’ she said.

Apacs also claim that the improved system will reduce the time taken to action standing order payments.

The banking body was forced to postpone the implementation of the faster payment service last year upon realising its initial deadlines were ‘tighter than expected’.

Statistics indicate that phone and internet transactions account for 4% of all payments in the banking system, whilst standing orders make up a further 9%.

Top

Darling poised for ‘green Budget'

Chancellor of the Exchequer Alistair Darling is set to deliver his first Budget to the House of Commons at 12.30pm today.

Darling, who has faced controversy and criticism since succeeding Gordon Brown last June, is expected to use his debut Budget to address concerns over the country's dwindling economy and his own reputation.

The Chancellor is expected to announce his intention to impose higher taxes on the most polluting cars and air passenger flights in a bid to reduce the UK 's carbon emissions when he takes to the dispatch box.

Forecasters are predicting a new £2,000 ‘showroom tax' to be levied on 4X4 vehicles, whilst an increase on alcohol is also likely amid growing anxieties over Britain 's binge drinking culture.

Meanwhile, a controversial 2p rise in fuel duty, which is due to come into effect on 1 April, is expected to be delayed for a further six months. Business groups had lobbied the Chancellor to scrap the proposed increase altogether, fearing that small enterprises will struggle to absorb the additional expense.

However, with an economic slowdown predicted, the Chancellor may downgrade growth forecasts, although he is likely to stress that Britain will remain ‘resilient' in such troubling times.

There are many important provisions included within the Budget that fail to make the headlines; yet these may also affect you and your business. Visit our site today and tomorrow for a detailed summary of all the main announcements.

Top

Tax ‘revamp' needed to help economy prosper, argues CBI

Britain 's tax system is in need of a ‘radical overhaul' according to the Confederation of British Industry (CBI).

The lobby group claims that high business taxes are ‘damaging the UK economy' and is thus calling on Chancellor Alistair Darling to cut the rate of corporation tax from 28% to 18% by 2016.

The business think tank is also urging the Government to set up an independent commission to review the current tax rules.

A CBI report compiled by 12 leading tax experts suggests that a revamp of existing tax legislation would help stimulate business growth and inject life into the country's ailing economy.

CBI director general, Richard Lambert, said: ‘Our traditional tax system is no longer fit for purpose. We need bold action to restore a competitive headline rate of corporate tax.

‘A radical shake-up is also vital if clarity, certainty and simplicity are to be reintroduced to the system so firms can make Britain their long-term home.'

Shadow Chancellor George Osborne has also urged Darling to use his debut Budget to deliver a cut in business taxes.

‘I am suggesting a simplification of the system, getting rid of the very expensive reliefs and allowances that exist within the corporate tax system, and using the proceeds to cut the headline rate,' Osborne told the BBC.

Meanwhile the Trades Union Congress has condemned the CBI's proposed reforms, claiming that they would lead to ‘tax hikes for ordinary people'.

Top

Minimum Wage set to rise in October

The adult National Minimum Wage (NMW) will rise from £5.52 to £5.73 in October, Prime Minister Gordon Brown has announced.

For 18-21 year-olds the hourly rate will climb from £4.60 to £4.77, whilst the statutory minimum wage will increase from £3.40 to £3.53 for 16 and 17 year-olds.

Business Secretary John Hutton said: ‘I am proud of the minimum wage. It makes a real difference to the lives of many of our lowest-paid workers and protects them from exploitation. It also creates a level playing field for business and boosts the economy.'

The Department of Business, Enterprise and Regulatory Reform estimates that nearly one million workers will benefit from the October NMW increase, with women thought to account for two thirds of this figure.

‘This increase means that the minimum wage will have risen by 59% since it was introduced in April 1999 - almost double the expected growth in prices over the same period,' confirmed Paul Myners , chairman of the Low Pay Commission.

The Federation of Small Businesses (FSB), which had expressed concerns over past above-inflation increases, has welcomed the latest rise.

‘A way forward to improve the position of low earners is for the Government to give serious consideration to increasing the earnings threshold for tax purposes for those at the lower end of the scale,' advised Alan Tyrrell , FSB Employment Chairman.

Under new measures outlined by the Government, rogue employers who fail to comply with the NMW legislation could incur an unlimited fine, whilst the most serious cases may be referred to the Crown Court.

Top

2008 Budget: Darling's design for a ‘greener' future

Billed as a ‘responsible' and ‘green' Budget, the environment found its way to the top of the agenda in Chancellor Alistair Darling's debut Budget speech.

Darling used his first Budget statement to introduce a series of measures aimed at reducing the UK's carbon emissions, including a new zero rate of car tax to be levied in the first year for new, low polluting vehicles - just part of a wider reform of vehicle excise duty.

Despite attempts to improve his ‘green' credentials, the Chancellor declared that a 2p increase on fuel duty will be postponed from April to October this year to help the country through the current credit crunch. However, Darling advised of further 0.5p fuel duty rise that is planned for 2010.

Extra funding for road-pricing proposals and additional financing to help homes become more environmentally friendly were also pledged by Gordon Brown's successor.

Delivering his statement to the House of Commons, the Chancellor acknowledged mounting concerns over the global credit squeeze but insisted the UK was ‘better placed than other economies to withstand the global slowdown.'

If businesses were expecting further changes to the notorious proposed capital gains tax reforms, then they will be disappointed, with the Chancellor confirming that his controversial plans will be implemented as planned.

He also confirmed that a cut in corporation tax will take effect from next month.

Visit our website regularly for all the latest Budget updates - we will be publishing a comprehensive overview of the main announcements.

Top

2008 Budget Report: the political reaction

‘The cost of living is going up and Labour is making it worse,' Conservative leader David Cameron has argued.

Speaking in the wake of Alistair Darling's debut Budget statement, Cameron criticised the Chancellor's ‘failure to recognise ' the soaring cost of everyday living.

Cameron said Darling had had ‘the most disastrous start of any Chancellor in modern history' but conceded that his predecessor Gordon Brown should bear much of the blame.

‘The Chancellor was put in a hole by the Prime Minister and they both kept digging,' he said.

Cameron's thoughts were echoed by the Liberal Democrat leader, Nick Clegg, who accused Darling of performing an ‘act of political ventriloquism'.

Clegg claimed that Darling was using environmental taxes - such as those the proposed changes to vehicle exercise duty to target the highest polluters - to take more from ‘the kitty of the lowest earners'.

‘This was an opportunity to give whatever help possible to the millions of hard-pressed families who are feeling the pinch, whose money is simply not stretching as far as it once did,' he told the Commons.

Describing the Darling's statement as a ‘green cop out', the Tory leader added: ‘This is a meagre , tinkering Budget which gives precious little help to the poor but maintains special treatment to the rich - a Budget designed to fill a black hole masquerading as good for the environment. A Budget which will not make Britain fairer.'

Top

2008 Budget Report: the business reaction

The Chancellor's relationship with the entrepreneurial community may have been tested to its limits in recent months, but businesses are today cautiously welcoming the measures outlined in Alistair Darling's first Budget statement.

Whilst there were no announcements that would ‘set the Thames alight' as CBI chief Richard Lambert observed, businesses are nevertheless celebrating the Chancellor's ‘responsible' and ‘simplified' approach.

The CBI has praised the Government's commitment to increasing the funds available under the small firms loan guarantee by 60% in the next year, and applauded the removal of the five year trading restriction.

However, Lambert warned that the ‘Government has much to do if it is to win back its enterprise credentials.'

Meanwhile, the six month deferment of a 2p increase on fuel duty has also attracted praise. Yet John Wright, national chairman of the Federation of Small Businesses, has claimed that ‘the is sue is unlikely to go away.'

Wright also welcomed the decision to delay a proposed clampdown on income shifting, which the FSB claims will substantially increase the paperwork burden incurred by family firms.

And commenting on the Treasury's pledge to invest an extra £60million in funding to improve Britain 's adult skills base, Brendan Barber, general secretary of the Trades Union Congress, said: ‘ We hope the commitment to give adults the chance to retrain will help people in redundancy situations or with outdated skills, and particularly women returning to the labour market.'

Top

2008 Budget Report: Darling downgrades economic growth forecasts

In his maiden Budget speech Chancellor Alistair Darling insisted that he could steer Britain through the current economic storm, but conceded that growth forecasts would be lower than expected.

The Chancellor told MPs that the credit crunch, which originated in America 's sub-prime housing market, posed a ‘major risk to the world's economy'.

As a consequence, Darling has revised the economic growth predictions that were forecast in his Pre-Budget Report last October, yet stressed the UK is ‘well placed' to withstand the global slowdown.

Growth forecasts have been cut for 2008 to 1.75%-2.25%, a substantial reduction of the 2.5%-3% that was originally envisaged. Darling has also advised that public borrowing will increase to £43 billion next year, rather than fall to the £36bn he had anticipated.

However, the British Chamber of Commerce (BCC) claims the Chancellor's Budget economic forecasts ‘remain unduly optimistic.'

Commenting on today's revisions David Kern, economic adviser to the BCC, said: ‘In the area of public finances the total borrowing figures, £36 billion for 2007/08 and £43 billion for 2008/09, are realistic and the Chancellor was right to allow an increase in borrowing in the next financial year.

‘However, the subsequent sharp reduction in borrowing beyond 2009 is again unduly optimistic. It is also disappointing that the Chancellor has not taken the opportunity to announce a significant move towards a more realistic set of fiscal rules,' he added.

Top

Business welcomes Enterprise White Paper

Business groups have applauded the Government's publication of an Enterprise White Paper, describing the proposed reforms as ‘encouraging' for entrepreneurs.

The ten year strategy, which aims to ‘unlock the nation's talents' and enhance enterprise skills and knowledge, includes measures that will ease the red tape burden for small firms and help existing business secure funding to expand.

‘We want more new and growing businesses in the UK and more companies and people acting on their enterprising ideas,' said Business and Enterprise Secretary John Hutton.

‘The UK's long term prosperity lies in unlocking the talent of enterprise for people from all sections of society and in our small businesses, helping them to grow.'

Proposed changes include allocating a 20% increase to the Small Firms Loan Guarantee Scheme, extending eligibility to growing businesses that are over five years old and increasing the funding available to female entrepreneurs.

Commenting on the Paper - which was published alongside the Chancellor's 2008 Budget Report - Sally Low, Director of Policy and External Affairs at the British Chambers of Commerce, said:

‘The Government has made some strong commitments: to introduce regulatory budgets; to hasten regulatory culture change by firmly embedding  the ‘think small first' principle into government policy and to increase investment to boost access to finance, which could help growing, ambitious firms to become bigger and better.'

Top

UK credit card losses pushed up by overseas fraud

The volume of money stolen from UK banking cards has increased by 25% due to a surge in overseas fraud, new research has revealed.

Total card fraud losses climbed to £535.2 million in the last year, reversing a two-year decline, according to figures released by the UK payments association, APACS.

Experts claim the sharp rise in deception on British cards can be attributed to the 77% increase recorded in fraud committed overseas.

Fraud committed abroad now accounts for 39% of losses incurred by victims of credit card fraud in the UK .

Meanwhile, fraud committed over the phone, via the internet or by mail order has risen by 37%.

Sandra Quinn, director of communications at APACS, said: ‘Although card fraud levels have now begun to go up again due to fraud abroad and card-not-present fraud losses, chip and PIN has proven to be an undoubted success in reducing card fraud on the UK high street.

‘And, as more countries follow our lead and upgrade to chip and PIN, the opportunities for criminals to use our stolen magnetic stripe details overseas will decrease.

Top

Businesses should ‘do more' to reduce employee absence

Employers are being urged to take action to reduce staff sickness levels following the publication of a Government report this week.

In a study commissioned by MPs, Dame Carol Black, the national director for health and work, urged businesses to offer more support to workers suffering from ill health.

The report suggests firms should do more to facilitate flexible working, such as offering shorter working days and lighter duties, to assist employees with their return to work and thereby reduce Britain 's growing ‘sick note culture.'

Companies that employ large numbers of workers should do more to promote healthy living through subsidised gym membership, whilst the development of a new consultancy service would provide more support for smaller firms, the report claims.

‘We must act now to build on the emerging consensus around a new approach to health and work in Britain ,' argued Black.

Some 175 million working days are lost each year as a result of ill health, costing the UK economy an estimated £100 billion in lost productivity, benefits and taxes.

Top