I met with Neil Dutton, Regional Organiser for the Federation of Small Businesses (FSB) in Merseyside this morning.  He’s responsible for the 1,500 members who run small businesses in Wirral.

The biggest single complaint he’s hearing at the moment, isn’t lack of custom, but that banks aren’t helping as much as they could.  Cashflow is a problem for many and in some cases banks are changing the line of credit.  For one business this meant their credit line was changed to a loan and they were charged 18% interest!

The recent change in VAT hasn’t helped very much as many aren’t registered.  One way which would help business (and I hear this raised all the time at the trader groups I attend) would be to reduce car parking charges.  This issue is one fo the six identified pressure points in the FSB’s ‘Keep Trade Local’ campaign which was endorsed by David Cameron back in March 2008.

I was surprised to hear from Neil that only 50% of those businesses who are eligible, are claiming for rate relief - many don’t know about it.  This is something I will continue to raise as I visit local shops and businesses.

This afternoon I met with Mersey Maritime based in Wirral to discuss the impact on businesses with the changes to port rates and the general economic situation.

Under the old scheme the Port Authority was responsible for payment of business rates, based on port turnover and was collected as part of the rent charged to leaseholders (businesses).  However, the new scheme has shifted payment from the port owner to the tenants – this has been backdated to April 2005.

The difference between the two schemes to the Government is £8m.  At a time when the Government says it wants to help small and medium businesses then surely a rethink is in order.

The backdated demands have already claimed one business – stevedoring firm Thomas Nichols Brown (TNB) – which went into administration last month with the loss of 27 jobs. 

When the bill arrives the liability has to be recorded on the company’s balance sheet.  If the bill is greater than the company reserves, then the company becomes insolvent, regardless of when the liability has to be paid.  This may present businesses with difficulties in gaining finance for expansion.

It took more than two years for the bills to be finalised and sent to firms.  However, because business rates are based on five-yearly valuations – the last one should have been conducted by April 2005 – tax bills are being back-dated three years.  Port businesses did not know in advance of the increased liability they would have to pay.

Any loss in dock business will result in people being made redundant both directly and indirectly.  Mersey Maritime estimate that somewhere in the region of 3000 jobs are at risk in Merseyside alone.

For more information click here to go directly to Mersey Maritime’s website you can also add your name to the ports rate petition.

Earlier today, I visited some of the traders on Victoria Road in New Brighton and, from those I spoke with, it seems the Government’s temporary VAT cut of 2.5% isn’t having much effect.  Sadly, two businesses in particular will struggle to survive the next couple of months unless things pick up.

Labour has been accused of “economic madness” as they push ahead with plans to increase business rates. On Monday, the Government introduced a Business Rates Supplements Bill which will allow town halls to increase business rates on local firms.

Supplementary business rates are likely to be used to fund local authorities’ current expenditure, rather than new infrastructure.  

Councils will effectively be pressured into levying supplementary business rates to make up for this lost funding from business rates.  

Supplementary business rates will be a backdoor way for Gordon Brown to hike taxes by stealth. At a time when firms are struggling for their very survival, it is economic madness to be pressuring town halls across the country to increase local business rates.

500,000 of Britain’s smallest companies, many in Wirral, will have paid £2.4 billion more in tax between 2006 and the end of the next tax year thanks to Gordon Brown’s changes to small companies tax.

The figures, compiled from answers to parliamentary questions, reveal that Gordon Brown’s decision to abolish the starting rate of corporation tax (of 0%) in 2006 meant over 250,000 of the least profitable companies became liable for the full small companies rate, now at 21%.

In total, some of Britain’s most marginal companies will have paid as much as £900 million in extra corporation tax by next year, when previously they were exempt.

Also hit are companies with profits of just £10k-£50k, a quarter of a million of which will have paid as much as £6,194 more in tax by 2009. This is due to Mr. Brown’s decision to remove the Marginal Starting Rate Relief from corporation tax.

Both these groups of companies also faced a second wave of tax rises due to Labour’s increase of the small companies rate from 19% in 2006-07 to a planned 22% in 2010.

Justine Greening, the Shadow Economic Secretary, condemned Labour’s approach to Britain’s small companies:

“At a time when 1 in 10 businesses are reported as being on the brink of failure, these figures reveal the truth about how Gordon Brown has treated Britain’s small businesses over the last 3 years. It is as if he has tried to tax our smallest companies out of existence.”

George Osborne has highlighted criticism of Gordon Brown’s temporary VAT cut by the chief economist of the International Monetary Fund.

Olivier Blanchard said temporarily cutting VAT “does not seem to me to be a good idea” and stressed that a 2 percent reduction in prices “is not perceived by consumers as a real incentive to spend.”

The Shadow Chancellor, described this as “Gordon Brown’s nightmare before Christmas”:

“One of the most respected and senior economists in the world has just said that Gordon Brown’s temporary VAT cut, the centrepiece of his plan for the recession, is not a “good idea”. The recession is getting deeper, and Labour is bankrupting Britain again.”

This latest attack on Labour’s VAT cut follows previous criticism from, amongst others, Peer Steinbrück, the Social Democratic finance minister, and Stephen Robertson, the Director General of the British Retail Consortium.

George Osborne has attacked Gordon Brown’s decision to cut VAT after a report showed it has done little to lift consumer confidence.

The latest update from the Synovate Retail Performance, which measures the number of shopping trips people make, reveals that the decrease in VAT has made little difference in encouraging people to spend.

The Shadow Chancellor described the update as the “first sign” that the VAT cut was an expensive failure:

“Anyone could see that reducing VAT by 2.5% when shops are cutting prices by 20 per cent will not have a huge impact on consumer behaviour – and here is the evidence.”

He stressed that the only result of the cut will be an extra £12.4 billion of national debt – and warned, “With Labour planning to increase National Insurance and hike VAT to 20% after the next election, shoppers know that a tax bombshell is on the way to fund this reckless borrowing.”

Figures out last week from the Insolvency Service that show a dramatic rise in the levels of individual bankruptcies and company insolvencies.  These figures are a stark indication of how the financial crisis is now causing huge pain to already hard-pressed families and small businesses.

Ten years of Gordon Brown as Chancellor, and now the bills are coming in and have to be paid. While he grandstands on the world stage, jobs are being lost, businesses are going under and family homes are being repossessed.

Statistics from the Insolvency Service show that individual bankruptcies have jumped 12 per cent from last quarter to a record high of 17,341 (Q3 2008); company liquidations have leapt 10 per cent and administrations up 7 per cent http://www.insolvency.gov.uk/otherinformation/statistics/200811/table1.htm

Conservative proposals on insolvency…

New figures show that just 1 in 4 small businesses in the North West are claiming relief from business rates.  According to High Street Britain 2015, Report by the Small Shops APPG, 2005, 2000 small shops are closing every year.

Rising business rates combined with the credit crunch are straining local shops. Conservatives are committed to helping small businesses maintain and grow their businesses as the country faces recession. It is a clear recognition that small businesses are the lifeblood of the country’s economy and at the heart of each community. Many shops are eligible for rate relief but do not know about it or find it too complicated to apply.

And yet many are not claiming a reduction in the rates that they are entitled to.  The Local Government Association believes that some 870,000 firms are eligible for the rebate but only half have claimed. (1 June 2006).

To work out if your business may be eligible, click here

Earlier today, the Conservatives announced plans to ‘keep Britain working’.  Tax cuts worth £2,500 per person, per year would be given to employers who hire new workers who have been unemployed for three months or more. £2.6 billion of tax breaks would be given to employers in total – and this would be paid for using the money saved on welfare payments.   Other measures include:

• A 2-year council tax freeze, paid for by cutting back on government advertising and consultancy fees
• Taking the family home out of Inheritance Tax and nine out of ten first-time buyers out of Stamp Duty by introducing a levy on non-domiciles
• Allowing small businesses to delay their VAT payments by 6 months
• Cutting payroll taxes for the smallest companies