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20 October 2010

FSB response to the Chancellor's Comprehensive Spending Review

Reference number: PR/2010/56

FSB News Release

PR 2010 56

Issue date: Wednesday 20 October 2010

FSB response to the Chancellor''s Comprehensive Spending Review

Following the Chancellor's statement on the Comprehensive Spending Review today (20 October), the Federation of Small Businesses (FSB) urged the Coalition Government to now put in place the missing link, namely a Small Business Programme for Growth.

FSB research has shown that three quarters of small businesses thought the Coalition Government should cut spending to tackle the public deficit and six in 10 said they were more willing to accept cuts in public spending because of the size of the public sector deficit.

The FSB welcomed measures to increase the number of adult apprenticeships by 50 per cent to 75,000 new apprentices a year. Also welcomed were the measures in moving towards a low carbon economy and the commitment to improve the infrastructure of the country. The £530 million directed from the Government and the BBC to put in place superfast broadband pilots is something small businesses were calling for. The investment in the Post Office Network is applauded.

However, the FSB believes the missing link in the Government''s deficit programme is the need to create growth – increasing the tax base, creating more businesses and incentivising small firms to grow and innovate.

A Programme for Growth is even more important given that latest FSB research shows that 10.4 per cent of firms expect to decrease employment over the next three months as business confidence in future prospects and revenue growth weakened over the July to September period. 

A Programme for Growth aimed at small firms will be very relevant given that more than 80 per cent of jobs in the EU were generated by small businesses between 2002 and 2007.

In a future Programme for Growth, the FSB is calling for:

  • An extension to the National Insurance Contributions holiday to include existing firms with up to four members of staff and provide incentives when they take on three new employees - funded by scrapping the £1 billion Regional Growth Fund
  • A cut in VAT to five per cent in the construction sector to help create jobs and stimulate the economy, but also increase revenue to the Treasury
  • A cut in the business support budget to £500 million and concentrate spending on genuine business support for micro businesses and a fully operational web portal
  • A business-led National Mentoring Service to be created through the Institute of Enterprise and Entrepreneurs to match mentors with businesses with backing from the banking industry

John Walker, National Chairman, Federation of Small Businesses, said:

"We all know we are living in an age of austerity and that these cuts will affect us all. But our members understand that to reduce the public sector deficit, these cuts had to be made. The small business community continues to have a vital part to play in driving a credible recovery and taking on new members of staff to help tackle unemployment, so it is now vital the Government puts a Small Business Programme for Growth into action immediately.

"As our research shows, small firms are at tipping point and lack the confidence to take on the 500,000 people that will be made redundant as a result of these cuts. So it is up to the Government to incentivise the small business community – through extending the National Insurance Contribution holiday to existing firms and cutting VAT to five per cent in the construction sector – to promote growth and help small firms take on new staff."

ENDS