Budget will give tax breaks to small firms

GORDON BROWN will unveil a "Budget for Enterprise" next month, including new tax breaks for small firms and for workers who retain shares in their own company.

The Chancellor's pre-Budget thinking is revealed in a report, leaked to The Independent, by the Labour Party's economic policy commission, which he co-chairs. But Mr Brown's commitment to the "enterprise culture" championed by Margaret Thatcher will worry some Labour MPs.

Yesterday left wingers attacked Stephen Byers, the Secretary of State for Trade and Industry, for saying that wealth creation is more important than wealth redistribution. Outlining the Government's plans, Mr Byers said: "We will extend employee share ownership through targeted tax reform to reward long-term commitment by employees. We will make it easier for employees to become stakeholders in their company."

At present, one million workers are given shares and a similar number granted share options. But only seven per cent of the workforce has a stake in their company, and Mr Brown wants to double the number of firms running share schemes. The Chancellor believes wider share ownership will boost the "enterprise culture", and Britain's productivity.

He is worried that many workers sell their shares, and in his 9 March Budget he is expected to announce higher tax relief for employees who hold them for a long period - perhaps more than three years.

Mr Brown is considering whether to raise the amount of share options that can be granted to senior managers tax free as incentives to improve company performance. The current pounds 30,000 limit is thought to be much too low by entrepreneurs, especially in hi-tech industries.

The Labour report suggests that a temporary increase in tax allowances for investment by companies, originally intended to last for only the current tax year, will be made permanent.

During Prime Minister's Questions, John McAllion, MP for Dundee East, demanded an assurance, in the wake of Mr Byers comments, that Tony Blair would "tackle through socialist policies of redistribution the massive inequalities in health, access to decent housing and in wealth which continue to disfigure and to scar our country."

The Prime Minister replied: "This Labour Government believes there is no inconsistency between policies that promote business and enterprise and the pursuit of a more just society."