Chancellor must not 'tinker with the tax system'

In the run-up to this year's Autumn Statement, we've been hearing a lot about the chancellor's plans for helping Small and Medium Enterprises (SMEs). Tens of thousands of our members throughout the UK work closely with SMEs and are often their first port of call for help, so extra support for SMEs is something to be welcomed.

However, some of the measures that have been announced need to be approached with caution. For instance, the plans for credit easing look like a cross between the £20bn Working Capital Guarantee of 2008, which suffered from very low uptake among banks, and European Investment Bank (EIB) guarantees. EIB guarantees are seeing comparatively low uptake in the UK too (equal to 0.1 per cent of SMEs' output, which is a quarter of the EU average ratio), and two-thirds of all EIB-guaranteed loans are made by only one bank. Worse still, credit easing hinges on the shaky assumption that the prospect of government bailouts is not already priced in by bank bondholders.

With the OECD announcing the UK and eurozone could be heading back towards recession, the economic outlook for 2012 continues to weaken. This is something we've seen from our own Global Economic Conditions survey, the largest global survey of accountants' views on the economy. A weak outlook is already dampening demand for finance; credit easing won't address this, especially as the lower cost of borrowing is in no way guaranteed.

It will be interesting to see how the chancellor's announcements for infrastructure spending pan out for SMEs. The chancellor wants to encourage private pension funds to invest in infrastructure projects, but traditionally pension funds invest in larger-scale projects that SMEs often struggle to get involved in.

Looking at taxation, we don't expect any big changes, although you can't rule out further announcements or statements of intent about removing the 50p top rate of tax. We hope the chancellor avoids the urge to tinker too much with the tax system. Too many changes, or too much fiddling round the edge of the tax system, would be detrimental to business and are not effective long-term solutions. Businesses and families need stability when it comes to tax.