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Pre-Budget Report
REV/ HMT/
27 November 2002
New measures outlined in the Pre-Budget Report today will benefit up to 200,000 businesses and entrepreneurs and take forward the Government's support for innovation.
Chancellor of the Exchequer, Gordon Brown, said:
"Enterprise is the lifeblood of the UK economy - it boosts productivity, creates employment and prosperity, and revitalises communities. This Pre-Budget Report demonstrates the Government's commitment to promoting and supporting enterprise across society, and particularly within disadvantaged areas, changing attitudes to enterprise - from the classroom to the boardroom - and tackling the difficulties entrepreneurs can face in starting and growing their businesses."
The Government is committed to boosting enterprise in the UK to help raise productivity and regenerate disadvantaged areas. The Pre-Budget Report and Enterprise Britain: a modern approach to meeting the enterprise challenge set out a series of new measures to:
Enterprise Britain: a modern approach to meeting the enterprise challenge, published today by the Treasury and the Small Business Service, sets out the revival of the enterprise economy and outlines the challenges facing the UK. It also sets out the steps the Government is taking to ensure that the UK realises its full entrepreneurial potential, by:
Innovation is one of the key drivers of productivity growth, complementing the contribution from entrepreneurship. Two major reviews to improve innovation throughout the UK economy were launched today.
The Government has commissioned a wide-ranging review on the contribution that improving the UK's relative innovation performance will make to close the productivity gap, and the strategy for doing so. To complement this innovation review, the Government has asked Richard Lambert to examine how - building on the research and development (R&D) tax credits and the successful University Challenge and Higher Education Innovation Funds - the long-term links between British business and British universities can be strengthened to the benefit of the British economy.
The innovation review will:
The complementary business-university collaboration review will:
To encourage small business investment and cut red tape, the Government will:
To help new and growing small businesses gain access to finance and business support services, the Government will:
To help tackle the acute barriers to enterprise in disadvantaged communities, the Government has designated 2,000 Enterprise Areas, covering the most deprived areas in the UK, in which Government measures to boost enterprise are concentrated. The Chancellor announced today a further package of measures to improve conditions for businesses in these Enterprise Areas, including:
Businesses in the 2,000 Enterprise Areas already benefit from:
Budget 2002 announced an extension to the VAT flat-rate scheme. From April 2003 over 650,000 businesses will be eligible for the scheme.
From April 2003 businesses with a turnover of up to £150,000 will be offered help and support if they face difficulties, before they face the prospect of a fine for late payment. Up to 200,000 more small businesses will benefit from this extension.
Enterprise Britain: a modern approach to the enterprise challenge, published today by the Treasury and the Small Business Service, sets out the development of the new enterprise economy and the role of enterprise in increasing productivity and regenerating the UK's least prosperous communities. The document outlines the evidence to support enterprise's inclusion as one of the five productivity drivers and sets out the principles for Government intervention. It also sets out the full range of policies the Government has already put in place and further steps it will take to stimulate enterprise throughout the UK, and especially in the 2,000 Enterprise Areas.
While entrepreneurs themselves are the main components of change, the Government is playing an important role in promoting enterprise by:
The recently published Cross-cutting review of Government Services for Small Business noted that Government at all levels spends around £2.5 billion giving support to SMEs. The Small Business Service will shortly be publishing a Framework for Government Policy towards small business to ensure that service standards for SMEs are improved across Government.
Richard Lambert - former editor of the Financial Times - supported by a cross-departmental team, will lead the business-university review. He will report to Government by Summer 2003. This review will feed into the innovation review, which will also report by Summer 2003. A steering group led by the Minister for Science and Innovation, Lord Sainsbury, will oversee the innovation review. The group will include representatives from Government departments, business, Regional Development Agencies, trade unions and academia.
Both reviews build on the substantial increase in resources being invested in the UK science and engineering base arising from the Spending Review 2002 (an extra £1.25 billion by 2005-06 compared to 2002-03) and in business innovation (through the R&D tax credits and increases to the Department of Trade and Industry's innovation budget). The Government's science strategy focuses on:
The voluntary flat-rate scheme was introduced in Budget 2002 for businesses with an annual VAT exclusive turnover of £100,000, making around 500,000 businesses eligible to join. The Chancellor also announced that from Budget 2003 the scheme would be extended to businesses with a VAT exclusive turnover up to £150,000.
The VAT default surcharge is designed to encourage businesses to submit their VAT returns and tax payments on time. When a business is late in paying its VAT return for the first time a penalty is not applied, but it is notified that if it is late again it will be liable to a surcharge. The penalty rate escalates from 2 per cent of the tax paid late up to a maximum of 15 per cent for each late payment.
The rules were reformed last year for businesses with a turnover up to £100,000 so that they are now offered advice and support and the opportunity to sort out any difficulties before they incur penalties.
As announced in Budget 2002 the qualifying turnover will be increased to £150,000 - meaning that up to 700,000 small businesses will be covered by the reformed system. The likelihood of receiving an automatic penalty will be removed for all but the most persistent late payers.
Starting up in Business is a package of measures introduced in January 2001. The package aims to encourage self-employed people to register with the Inland Revenue as soon as possible after starting up, providing new support material for them and seeks to raise awareness of that support. The Inland Revenue's evaluation of the package found that along with increasing numbers of registrations, self-employed people are now registering earlier. People receiving the new material said that the guidance provided a lot of practical help and led them to realise that the Inland Revenue could be a useful source of advice.
Copies of the evaluation report Starting up in Business are available on the Inland Revenue website. Enterprise Areas
Full details of the Enterprise Areas, the most disadvantaged areas across the UK, which are eligible for the stamp duty exemption, are available at www.inlandrevenue.gov.uk/so/disadvantaged.htm
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