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With the 2012 Budget looming, the Government has been urged to introduce a series of temporary tax cuts in a bid to avoid further recession. However, despite recent warnings that the UK's top credit rating is at risk of being downgraded, Chancellor George Osborne has insisted that the UK must not waver in its austerity programme.
Meanwhile, small business lending has come under the spotlight this month, following the news that the UK's five main banks have missed their targets for lending to small businesses by more than £1 billion.
2012 Budget: We will be updating our website following the Chancellor's announcements, so be sure to visit the site for the latest information.
The Chancellor must use his forthcoming Budget to deliver 'temporary and targeted' tax cuts to help Britain avoid further recession, an influential think tank has claimed.
In its Green Budget, the Institute for Fiscal Studies (IFS) suggests that the Government could safely cut taxes temporarily without alarming the financial markets. Doing so, the IFS said, would help to insulate the UK from the crisis in the Eurozone. However, it warned that there was little scope for long-term tax cuts.
'The Chancellor faces his third Budget with the economy and public finances in considerably weaker shape than he had hoped a year ago. His room for manoeuvre is further curtailed by risks that the economy might do even worse than expected, especially if the Eurozone should break up', said Paul Johnson, Director of the IFS.
The report, which comes ahead of the Chancellor's Budget on 21 March, states that cuts to national insurance or VAT would have the most immediate and significant impact on economic growth.
Gemma Tetlow, an economist at the IFS, said any proposals for tax cuts would need to be 'timely, temporary and targeted'.
Meanwhile, ratings agency Moody's has put the UK on 'negative outlook', prompting concerns that the country's AAA credit rating is at risk of being downgraded.
The agency stated that 'any further abrupt economic or fiscal deterioration would put into question the Government's ability to place the debt burden on a downward trajectory by fiscal year 2015/16'.
However, despite calls from the Labour party for a relaxation of the existing austerity measures in order to boost economic growth, the Chancellor took the news as an endorsement of the Government's programme, arguing that it only served to prove that Britain 'must not waver' in dealing with its debts.For all the latest announcements following the 2012 Budget, visit our website
The UK's five main banks have missed their Government targets for lending to small businesses, a new report has revealed.
The banks met their overall lending targets, allowing new loans of £214.9 billion, but only £74.9 billion was lent to small and medium-sized businesses, compared to the target of £76 billion.
According to the banks, demand for credit fell among smaller firms during 2011 and remains weak.
The All Party Parliamentary Small Business Group has recently been examining the reasons why many small firms are still struggling to access finance.
The group's Entrepreneurship Inquiry has explored a number of issues, including why women and mature people are less likely to apply for bank finance, and why a third of small businesses are still having problems accessing money from the banks.
The Confederation of British Industry (CBI) has called for measures to remove the barriers to increasing non-bank lending, and to tackle the current lack of demand.
John Cridland, CBI Director-General said, 'This is as much a problem of demand as supply. Firms need independent help and support to locate the finance that's right for them. So we must cut through the red tape and complexity surrounding non-bank finance to make it more easily understood by small and mid-sized businesses, which often lack the resources of a larger company'.
Meanwhile, the Federation of Small Businesses (FSB) has highlighted the fact that entrepreneurs lack the confidence to apply for bank finance, with many new business owners using more of their own money to fund their business.
John Walker, FSB National Chairman, said, 'We have heard for so long that small businesses cannot access finance from the banks, but for some entrepreneurs even approaching the bank is not an option. While alternative forms of finance need to be promoted, this needs to change and confidence needs to be instilled in all sectors of society so that they know bank finance is a real option'.
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'For too long, the UK's small and medium-sized companies have relied heavily on banks for most of their credit. If we do not act quickly to increase the range of available finance, other countries will steal a march on the UK.'
John Cridland, Director-General of the Confederation of British Industry, discussing the barriers to small business funding.
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