Tax Cuts Have To Be Paid For 
On Tuesday night, the Chancellor, George Osborne told the annual EEF Manufacturers’ Dinner that there will be no easing of austerity in this month’s Budget, as any tax cut “has to be paid for.”

With only two weeks to go until George Osborne unveils his Budget and with the Chancellor facing calls for tax reforms to stimulate growth, Mr Osborne’s warning to the EEF that “the days of unfunded giveaways are over – and they’re not coming back in this budget” will come as a disappointment to those who have called for cuts to the Chancellor’s austerity measures.

The Chancellor made it clear during the dinner that although tax changes are likely, he will claw back the lost revenue elsewhere, such as through higher taxes in other areas or via spending cuts.

Mr Osborne told the EEF: “I can tell you: we are not going to put that credibility and stability and low interest rates at risk. Our action is bringing the deficit down - but it is still far too high.

“The days of un-funded giveaways are over - and they're not coming back in this Budget. Everything has to be paid for.”

Whilst the warning that unfunded giveaways are over will have been disappointing to hear, the Chancellor also offered good news to businesses, as he pledged to have a flagship credit-easing scheme to encourage lending to small businesses up and running by March 21.

The National Loan Guarantee Scheme is set to see £20 billion of taxpayers money used to guarantee funding for UK banks, on the condition that the money is lent to small businesses. A detailed announcement is expected next week.

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Banks Failing Small Businesses 
A report published yesterday revealed that the majority of small firms who applied for an overdraft for the first time were rejected.

The SME Finance Monitor report, which was commissioned by banks, found that almost forty percent of cash-strapped businesses were turned down for a first-time loan; whilst many small firms are still struggling to survive – despite the government’s attempts, via Project Merlin, to get banks to increase their lending to small businesses last year.

Along with forty-percent of small firms being turned down for a first-time loan, the report also found that of the firms which applied for an overdraft, fifty-five percent got no facility; and less than a third of businesses received what they asked for and took it.

Labour’s shadow business secretary, Chuka Umunna, admitted that the findings of the report were “worrying” and said: “At a time when we need more people to be starting and growing businesses, it is worrying that more than half of firms applying for an overdraft for the first time last year were rejected.

“Businesses are struggling to get the finance they need and many are being discouraged from applying in the first place.
“This is something that both ministers and the banks need to address urgently.”

Overall Project Merlin’s gross lending target to small firms was £76 billion; yet banks managed to hand out only £74.9 billion – a shortfall of £1.1 billion.

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UK Forecast Cut 
Business lobby group, the British Chamber of Commerce, has warned that growth this year will be slower than previously forecast; but added that the UK will avoid a double-dip recession.

In its quarterly forecast, the British Chamber of Commerce has predicted that the UK economy will grow by 0.6% rather than the 0.8% it had previously forecast, warning that the UK’s economy still faced serious challenges with debt levels that are too high and unemployment set to rise to almost three million by the start of next year.

John Longworth, the Director General of the British Chamber of Commerce has urged the Chancellor, George Osborne, to “pull out the stops” in the budget to help drive growth, saying: “Our economic forecast underlines the need for the Government to deliver a Budget that will bring confidence to businesses.

“Businesses up and down the country are doing their utmost to find new markets and grow their firms, despite the difficult economic challenges they face. Only the private sector will drive recovery and help deliver public services, like education, healthcare and pensions.

“A sustainable recovery depends on creating the right conditions to empower businesses to drive growth. Companies need the best possible environment to generate wealth and create jobs.

“The Government must stick to plan A, but also stimulate growth within the economy. There is room within the current spending envelope for measures that will encourage firms to export, invest and grow.”

The quarterly forecast, from the British Chamber of Commerce, has also warned that growth is likely to be lower than expected in the second quarter of 2012 due to the extra bank holiday in June for the Queen’s Diamond Jubilee; whilst in July and August there could be unusually high growth figures due to the Olympics.

It added that growth from exports and business investment will prevent the UK from falling back into a recession this year, with prospects set to improve further in 2012, when the British Chamber of Commerce predict the economy will expand by 1.8%.

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Tax Payers Gift Taxman 
A recent report has found that tax payers, because they are failing to tackle their tax bills, are giving away on average £421 each per year, to the taxman.

By failing to claim tax credits and use tax allowances, taxpayers are missing out on £12.6 billion each year, with the biggest area of waste being tax credits. This includes child tax credits, working tax credits and pension credits, which the report claims more than £7.26 billion went unclaimed in the last year.

Other big areas of waste are tax relief on pension contributions at £2.4bn, tax relief on charity donations at £2.4bn and making use of ISAs at £403m; whilst it is believed that up to eighty-five percent of taxpayers haven’t done anything in the last twelve months to reduce the amount of tax they pay.

The chief executive of the company behind the report, said following the findings: “Looking back at the last decade and the tax wastage figures in our reports, the numbers are just as shocking now as they were then.

“'The message is clear – tax affects pretty much every one of us, and with an average of £421 up for grabs for each taxpayer, we should take some time and effort to ensure that we are being as tax efficient as possible.”

In total, over the last decade, £88.6 billion is reported to have been handed unnecessarily back to the taxman.

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Fifty Pence Tax Rate Damaging Economy 
Over five hundred business owners and entrepreneurs have warned that the fifty pence tax rate is damaging the economy and delaying the recovery from recession.

In a letter to The Daily Telegraph the small and medium sized business owners have said that the tax rate has prevented them from expanding their business and taking on more staff; adding that the levy is reducing government incomes and damaging the economy, rather than assisting its recovery.

Within the letter, the business owners not only accuse the Chancellor, George Osborne of “putting populist politics before sound economics” but they are also calling for the levy to be scrapped in next months budget.

The 537 business owners who signed the latter say: “Given the current state of the UK economy, we urge the Chancellor to urgently consider scrapping the top rate of tax in his forthcoming budget.

“The tax, which is in effect a fifty-eight pence tax after national insurance is taken into account, puts wealth creators like us in a very awkward position, penalising high earners through an unfair, politically motivated tax puts populist politics before sound economics.

“The result is that the fifty pence tax is set to reduce government income, and damage the economy, the public services and charitable giving.”

Despite the letter from the business owners, the Shadow Chief Secretary to the Treasury, Rachel Reeves, has claimed that now is not the time to do away with the fifty-pence rate, saying: “When millions of families and pensioners on middle and low incomes are being squeezed by the VAT rise and cuts to tax credits, cutting taxes only for the richest 1% cannot be the right priority now.

“But these business owners are right to call on the government to take action to stimulate growth and jobs in our economy.”

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