Less tax and less red tape needed, warns business

Business leaders and specialist advisers last night criticised the chancellor for raising the tax burden on companies and failing to cut public spending. They also accused him of generating more red tape and failing to introduce any measures to stimulate productivity.

There was concern new measures to prevent tax avoidance could hit legitimate business arrangements, while employers' group, the CBI, warned the changes could force some businesses overseas.

Sir Digby Jones, CBI director general, said: "The UK is already slipping down the competitiveness league as the chancellor raises the tax burden on business - and now he has declared war on previously accepted principles for tax calculation ... which may well persuade companies to move to other economies."

David Cruickshank, head of tax at accountants Deloitte, said the chancellor was expecting to raise increasing amounts from the corporate sector and that large international firms would be worst hit.

The government received £34.1bn from the corporate sector last year, and is anticipating £41.8bn of corporate receipts this year, rising to £50.1bn in 2006-07.

"The message is clearly that the government expects the corporate sector to pay more. They expect anti-avoidance measures to yield more," Mr Cruickshank said.

Richard Collier-Keywood, head of tax at PricewaterhouseCoopers, said Mr Brown should instead focus on attracting inward investment to generate higher corporate tax receipts. "It is unlikely taxes can be increased sufficiently by cracking down on avoidance."

The Institute of Directors was also concerned about lack of public spending cuts. Director general Miles Templeman said if growth does not materialise, taxes will have to rise "unless the chancellor takes an axe to public spending".

There was also criticism that the chancellor was adding to red tape. Eric Anstee, chief executive of the ICAEW - the professional body for chartered accountants - said Mr Brown was "in danger of exacerbating the situation with changes and measures that will confuse and impose additional burdens on all businesses".

Some feared the government was doing little to encourage higher productivity. Royal Bank of Scotland chief economist Andrew McLaughlin suggested Mr Brown was suffering from "initiative fatigue" and had run out of good ideas.

Small business groups were little more impressed with the chancellor's package of measures. They welcomed the changes to capital allowances rules, the freeze on fuel costs, extra skills training and the more flexible VAT payment schemes for start-up firms.

But the Forum for Small Business said: "More should have been said to emphasise the government's programme on cutting back red tape."

The ICAEW said the government had to do "more than abolish regulations it has introduced" and urged the chancellor to focus on whether excessive regulation was the reason behind the recent growth of "microbusinesses" - that is, those with no employees.