Pressure on Brown to slash red tape and taxes

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The Chancellor is under growing pressure from business to reduce the tax burden and to slash red tape in next week's Pre-Budget Report.

The Chancellor is under growing pressure from business to reduce the tax burden and to slash red tape in next week's Pre-Budget Report.

Business organisations expect Gordon Brown to announce a number of measures, including the possible abolition of stamp duty on share dealing and tax concessions to the road haulage industry. However, a swathe of reports published this morning criticises the Government for making the business environment more difficult.

The demands come as business advisers Ernst & Young report the first increase for two years in the number of companies issuing profit warnings. A total of 74 firms issued profit warnings during the three months to September. This is 64 per cent up on the previous quarter and the first increase since the third quarter of 1998, with New Economy technology businesses suffering the most.

A separate report from PricewaterhouseCoopers estimates that the tax burden has already climbed to 37.7 per cent of GDP, rather than the Treasury estimate for 1999/2000 of 37.0 per cent, and will rise further to 38.5 per cent by 2001/02. That would be equivalent by 2002 to a tax increase of £30bn in five years.

Of that total, two-thirds merely reflects the buoyancy of the economy and one-third discretionary tax increases. John Hawksworth, head of macroeconomics at PWC, notes that all those planned increases are either taxes on business or indirect taxes such as petrol duty.

He warns against cutting taxes by the full £10bn in the short-term, as this would fuel inflationary pressure. However, Mr Hawkesworth argues that modest cuts of £3-4bn in fuel duties, or an equivalent increase in spending on pensions, is affordable.

In a separate report published today, the British Chambers of Commerce warn that the complexity of the UK tax system and the cumulative impact of regulation are stifling business competitiveness and job creation. It says that the Government should appoint a tax "tsar" to simplify the system.

Ian Peters, the BCC's deputy director-general, said: "The top priority for the Chancellor must be a simpler tax system that promotes productivity and growth."

The Engineering Employers Federation, in a joint Pre-Budget submission with 21 other organisations, representing companies with 1.8 million employees, is seeking a range of grants for industry and targeted tax breaks.

And another report published today, from the Institute of Directors, estimates that the cost of administering the Working Families Tax Credit is £300 a year for every small business employee receiving the credit.

A survey of its members showed 62 per cent of small firms had taken on additional resources to deal with burgeoning red tape, which is taking up an average of six hours a week.

Richard Baron, deputy head of the IoD policy unit, said: "There is no longer a presumption that regulations should be removed, rather than added to."

The main factors cited by companies issuing profit warnings, according to the Ernst & Young survey, were sales below forecast, high overheads and operating costs, and increasing competition in core markets. But it said the increase did not presage a general economic downturn despite the high oil price and strong euro.