Parties pledge ‘credit-crunch aid’ for small firms

Small businesses may be about to rethink their political leanings as the nation’s two main parties each start proposing what to do to help them through the financial storm.

Whitehall whispers reported yesterday suggest Alistair Darling will summon the bosses of Britain’s leading banks to quiz them about escalating fees for small businesses.

Like the chancellor, ministers are said to be angry that most banks have imposed higher rates of interest, charged a fee for doing so and even levied inflated charges on accounts.

The tactic, a direct result of the credit crunch, comes in spite of £500bn rescue package the government gave banks to boost confidence and lending across their sector.

In an interview with the Sunday Telegraph, Mr Darling said he would now be "reprioritising" his spending plans to ensure new beneficiaries, like small businesses.

He hinted the pressures on small firms were playing on his mind last week, when he told MPs that, in return for state support, banks should lend to small firms at 2007 levels.

But as overdraft and interest fees have already been raised, the Conservative Party says the best remedy for small firms feeling the pinch is to defer their VAT bill for up to six months.

Under the plan, while there would be no reduction in the VAT payable, the taxman should introduce a VAT "holiday" for firms, similar to that given to farmers in the foot-and-mouth crisis of 2001.

Shadow Chancellor George Osborne also wants councils to speed up the time it takes to pay small businesses’ invoices, and called banks to "stop the march to mass insolvencies."

"Britain's small businesses need our help," said Tory leader David Cameron.

"We intervened to prevent the beating heart of our economy - the financial system - from collapsing. We've got to do the same for its lifeblood."

The Conservatives also said the government must do "everything it can" to help small businesses, including reducing the small companies’ tax rate down (2p) to 20 pence.

 

Photo by Christian Guthier

 

20th October 2008

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