The British Chamber of Commerce (BCC) has released its latest Monthly Business Survey, which provides an interesting insight into the issues currently concerning businesses in the UK.

Of those who replied to the survey, 41% stated that they believed an incoming Government’s number one priority should be to reduce the budget deficit, while 22% indicated that reducing red tape should take precedence and 13% believed that streamlining the UK’s tax system was the most pressing issue.

When asked what would be the least damaging tax increase for their business, 36% said that a VAT rise would be least damaging, while a rise in National Insurance Contributions (NIC) was the least popular of all the options offered at just 6%.

Calculations made using the Treasury’s “Tax Ready Reckoner” show that raising VAT by one per cent to 18.5% would raise an additional £4.5 billion in revenue for the Government. Raising NIC by 1%, which the Government plans to do in 2011, would generate £5.1 billion in extra revenue.

Bearing these figures and the results of the survey in mind, the BCC is arguing that the NIC rise should be scrapped and replaced with a one per cent VAT rise, with targeted spending cuts making up the shortfall.

David Frost, the Director General of the BCC, commented: “The message from business is clear. After an election, we have to get a serious grip on the country’s public finances and escalating debt. Cutting the deficit means making tough decisions on spending, like freezing the public sector wage bill and reforming public sector pensions.

“Companies have and will continue to play their part in creating wealth and jobs, generating economic growth and driving recovery, but the right environment needs to be in place.

“Raising a damaging tax on business, like NICs, will be counter-productive. It will mean fewer jobs and less tax revenue in the long-term. While businesses fully understand the need to bring down the UK’s deficit, they are clearly saying that using VAT would be a less damaging way to achieve this.”

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