Business Brown

The chancellor has set himself on a collission course with trade unions after pledging to deliver business tax cuts in the forthcoming budget.

Gordon Brown said on Friday that he wanted to build an entrprise culture and deliver cuts in corporation tax for small business.

"I want every young person to hear about business enterprise in school, every teacher to be able to communicate the virtues of business, every community to value good business leaders as role models," he writes in The Times.

In a move which will enrage unions, already frustrated by an apparent u-turn on workers' rights, the chancellor says that business is "the essential driver of a higher standard of living."

A spokesman for the TUC warned the chancellor that tax cuts could not be given priority over investment in schools and hospitals.

"While measures to boost enterprise are a welcome move in tackling Britain's productivity gap, tax cuts must not undermine the chancellor's spending plans," said the spokesman.

"Skills and innovation are also key drivers of productivity and we want to see tax credits in the budget to encourage investment and regional development."

Brown says that business will provide the "surest long-term guarantee of better public services for all".

"I am committed to further reducing the corporate tax burden on small business, and in my pre-Budget consultation I am examining measures to achieve this," he says.

"By reducing the tax on capital gains further we will also send a message to entrepreneurs that we will reward their initiative."

Business welcomed the announcement but stressed there was much more that could still be done to assist commerce and industry.

Digby Jones, the CBI's director general, said: "Mr Brown is right to stress the importance of enterprise, in particular when the economy is so fragile. Firms will be delighted that he has reaffirmed promises to cut taxation on enterprising businesses, in particular corporation tax and capital gains tax.

"But it would be wrong to think the government has done enough to create the dynamic environment that the chancellor rightly wants. The most important thing he can do now is simplify the absurdly complex tax system so entrepreneurs spend more time creating wealth and less time filling in forms.''

The chancellor has also been warned that he must ensure that the government's tax take keeps up with projected increases in public services.

In a report on the health of the British economy, the International Monetary Fund warns Brown that any increased spending would have to be funded through tax increases.

To meet the shortfall, the IMF proposes that the chancellor extends VAT to food and considers charging for some public services.