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Monday, November 1, 1999 Published at 10:38 GMT

Business: The Economy

Tax boost for enterprise

Gordon Brown: Businesses must innovate or be left behind

The UK Chancellor, Gordon Brown, has called for a new spirit of enterprise in the British economy, saying firms that do not innovate and adapt to the changing global economy will be swept away by the competition.

Addressing the Confederation of British Industry conference in Birmingham, Mr Brown gave details of a multi-million-pound tax concession on share options for managers of small businesses in an attempt to encourage a new enterprise culture.

BBC News' Rory Cellan-Jones: "It seemed there was a cabinet minister around every corner"
The scheme was first announced in the Budget. Up to 10 key employees in growing companies would be allowed share options of up to £100,000 free from income tax. The plan is expected to cost the Inland Revenue £40m.

Mr Brown said: "I want to send the message to entrepreneurs in every part of the country that this government means enterprise and the rewards of enterprise are open to all."

He said the scheme was designed to encourage some of the best executives to stay in Britain and devote their energies to building up smaller companies, particularly in the high-technology sector.

Listen to Gordon Brown's speech in full
"We give those people prepared to move to the more risky ventures, the small and medium-sized companies, particularly in the high-technology area, who are prepared to undergo lower salaries in return for higher rewards, we are prepared to give them help with an enterprise management investment scheme.

"I think that is going to be widely welcomed throughout the whole of British industry.

The BBC's Guto Harri reports: "Relations at the top are clearly cordial"
"It is where British industry has been weak in the past - that we haven't got that group of small and medium-sized high-technology companies coming through and therefore we haven't had the jobs as a result.

"This is an incentive that puts us on a par, indeed in many ways better than America, and allows those people who are managers in big companies, or those who are considering whether to stay in Britain or go abroad to say 'Look, I will put my energies into building up this company. In return if I do it successfully, I will get rewards and of course the tax bill will be lower'."


The chancellor made the call for a new era of entrepreneurship the theme of his speech to the CBI.

The creation of an enterprise culture in the UK was an often stated goal of Conservative governments between 1979 and 1997. But Mr Brown says the Tories did not go far enough.

TUC General Secretary John Monks: "A step in the wrong direction"
While acknowledging Baroness Thatcher's achievement in first creating the "enterprise society", he stressed the need to go further.

"I want Britain to be, in every area, a creative, innovative and enterprising economy.

"The new economy will need more competition, more entrepreneurship, more flexibility and more long-term investment.

"Businesses, indeed countries, which fail to adapt, reform and lead the way will simply be left behind.

"We will all, together, have to raise our productivity, open up competition and improve our skills."


The shadow chancellor, Francis Maude, was sceptical of Mr Brown's announcements. He said: "Labour give with one hand but take much more with the other.

"It is typical of Gordon Brown to try to get a headline from a token pro-enterprise policy when the whole thrust of his programme has been to pile new taxes and regulations on to business.

"On Monday, Labour trumpet a £40m tax break for entrepreneurs. But just two days later they will be supporting a £475m tax grab on the self-employed.

"Business is paying £30bn more in tax thanks to Gordon Brown, and Labour's new red tape is costing firms £5bn a year."

The TUC general secretary, John Monks, condemned the tax concession scheme: "We will have to look at the details but at first sight the preferential treatment only for executives runs contrary to the need for all employees to be treated fairly.

"If there are to be tax breaks they should be available to all employees who contribute to the success of an enterprise. There should be no 'them and us'."


Next week, the chancellor makes his pre-budget statement, in which he will give details of proposals for modernising the capital, labour and product markets.

The CBI has already joined the British Chambers of Commerce in urging him not to loosen the public purse strings, saying that any moves to cut taxes or increase spending could exacerbate the divide between the struggling manufacturing and booming services sectors.

The CBI director general, Adair Turner, said such a move would simply stoke consumer demand, leading to further interest rate increases which would hit exporters who were already struggling because of the high value of the pound.

He said that tax cuts were not as high a priority as improving the UK's education standards and transport infrastructure.

He also urged the chancellor to consider targeting taxes better, including switching from tax on fuel to road usage charging.


In response, Mr Brown said the government would not make "the mistake of the 1980s" of relaxing its fiscal discipline the moment the economy started to grow.

He said the "tough grip" on fiscal policy would continue: "Public borrowing has been reduced by £30bn over the past two years and we will continue to lock in that fiscal tightening by keeping the public finances under control, while fiscal policy continues to support monetary policy in the next stage of the cycle."

He said the Bank of England's Monetary Policy Committee "will be and must continue to be vigilant and forward-looking in its decisions" as the UK builds "a culture of low inflation".

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