With pressure on the government to help small businesses through the financial crisis, Britain's accounting firms have made tentative predictions for what measures the chancellor will include in Monday's pre-budget report. Here's what PricewaterhouseCoopers, Baker Tilly and MacIntyre Hudson have to say on possible policies.
A reduction in VAT
Consumer spending could receive a boost from a cut in VAT, although any reduction would almost certainly be limited to 2.5% thanks to European statute. PricewaterhouseCoopers calculate such a move would cost the Treasury about £12 billion, but it would deliver a "big bang" that helps those on low incomes as Christmas approaches. But not everyone agrees. Baker Tilly point out that as far as businesses go, a VAT reduction would mostly give cash flow savings rather than actual cost reductions. What's more, the businesses least able to benefit quickly from this tactic would be precisely those that need short-term help the most, namely smaller businesses using flat-rate schemes.
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