Government offers SMEs 1bn credit

Chancellor Alistair Darling used today’s (24 November) pre-Budget report to announce that small and medium-sized businesses would be able to apply for credit between £1,000 and £1m.

Darling also announced a new business payment support service to allow companies in financial difficulty pay tax on a timetable they could afford.

There are also reforms to vehicle excise duties and the taxation of foreign profits.

The rate of VAT has been lowered from 17.5% to 15% beginning next Monday (December 1) for 13 months after which it will revert to the current level.

Income tax for those on salaries in excess of £150,000 will be raised to 45% from April 2011, while the income tax personal allowance of £120 a year for basic rate taxpayers will be made permanent and increased to £145 in April.

National Insurance contributions are set to go up by 0.5% from 2011.

The government has also revised its growth forecasts. For 2008 the economy is set to grow by 0.75%, with 2009 set to shrink by between 0.75% and 1.25%. Borrowing is set to rise to £78bn this year and £118bn in 2009.

Shadow chancellor George Osborne blasted the report for pushing National Debt to a trillion pounds.

Darling justified the biggest shake-up in economic policy since Labour came to power in 1997, saying it was the “right choice in these extraordinary circumstances”.

“If we did nothing we would have a deeper and longer recession that would cost the country more in the long term,” he said.

For the full pre-Budget report, click here to go to the HM Treasury website.

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