Business reaction: Tax rises are a threat to jobs, warns CBI

Business leaders expressed disappointment with the pre-Budget report last night, chiding the Government for threatening jobs with new tax increases.

Richard Lambert, director general of the Confederation of British Industry (CBI), said the announcement of a half a percentage point rise in national insurance contributions from April 2011 was a "serious mistake", while Stephen Robertson, of the British Retail Consortium (BRC), described the move, which follows a 0.5 per cent rise already unveiled in the April Budget as "madness". "The Chancellor has made a serious mistake imposing an extra jobs tax at a time when the economic recovery will still be fragile," Mr Lambert said, arguing that ministers had failed to set out a platform for job creation and economic growth.

Mr Robertson said Mr Darling "should have said he is scrapping the increase already announced, not adding to it". The CBI also claimed that the pre-Budget report failed to give more credibility to the Government's plans to restore the public finances, a view that was echoed elsewhere.

"The key theme of this year's [report] is prudence postponed," said Miles Templeman, director general of the Institute of Directors. "There is serious doubt as to whether the Government has any commitment to reducing the deficit. Yet again we see more of the same old spend, spend, spend story."

There was also concern at the tax on bankers' bonuses, with Mr Lambert complaining that while the measure might have populist appeal, "the threat of an exodus of talent is real".

The Chancellor's decision to extend for another year the property relief on empty shops and other vacant commercial premises with rateable values of up to £18,000 also failed to impress, with the BRC saying the exemption "goes nowhere near far enough".

Not every measure was criticised, however, with the CBI welcoming the extension of the time-to-pay scheme, which affords businesses faced with temporary financial difficulties more time to pay tax bills. The Chancellor said the scheme, which has helped more than 160,000 business, will be extended "for as long as is needed".

The Government also decided to defer the planned increase in corporation tax for smaller companies, leaving the rate for 2010-11 unchanged at 21 per cent. Mr Lambert said the moves would give small- and medium-sized firms "breathing space at a critical time". Elsewhere, plans to reduce the corporation tax rate on patent-related income to 10 per cent from April 2013 were welcomed, with tax experts highlighting the benefits for research intensive industries such as pharmaceuticals and technology.

Mr Darling also announced the establishment of a new body, Infrastructure UK, to advise on and help to deliver new energy, transport and technology projects. The Association for Consultancy and Engineering (ACE) said the initiative was a "signal of intent to focus on the strategic infrastructure that the UK needs".

However, changes to the climate change levy, including limits on tax breaks for gas and electricity suppliers that have made their operations more environment friendly, were criticised. The Taxpayers' Alliance said this would "severely increase the overheads of high-energy businesses".