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National insurance cut plans launch

Ministers will today launch in the Commons plans to hand a £2,000 national insurance cut to businesses and begin consultations on cutting slow payment of invoices.

David Cameron will mark the introduction of the National Insurance Contributions Bill with a tour of small businesses in the east of England, insisting the Government is keen to do everything it can help to help firms succeed.

The tax cut is due to be in place by April next year and the Government said 90% of the benefit would be felt by firms with fewer than 50 employees.

A consultation on ways to end late payment is also being launched, Mr Cameron said, because the problem can have a "devastating effect" on small and medium sized firms.

The Prime Minister said the Employment Allowance would save 1.25 million businesses £2,000 per year - and mean 450,000 of them will have their national insurance bills eliminated entirely.

He said: "An ambitious and thriving small business sector is vital for steering the economic recovery in the right direction and helping us to succeed in the global race.

"We are determined to do everything we can to ensure that our small firms can be successful and prosperous and people can fulfil their aspirations.

"Last week, we helped people get on the housing ladder and own shares. This week, we're helping small businesses start and expand. This Government is 100% backing people who work hard and want to get on in life a nd we're going to finish the job we started."

The consultation on late payment will review whether the Prompt Payment Code can be strengthened, consider whether new legislation or penalties are needed, and look at what can be done to increase transparency.

Mr Cameron added: "It's not right that suppliers are not getting paid on time for the work they do and the services they provide and I know that late payment can have devastating effects on our small and medium sized businesses.

"I am determined to make Britain the best place to start, grow and do business and to back people who want to work hard and get on."

The consultation on late payment was backed by business organisations.

Katja Hall, CBI chief policy director, said: "Late payment is a serious issue for all businesses but particularly for smaller firms, as cash flow is their life blood. Businesses already have a number of routes for recourse if they are paid late, but the reality is that few choose to act on late payment for fear of fall-out with their customers."

John Allan, national chairman, Federation of Small Businesses, said: "Being paid late or given extended terms can severely hamper many small firms. They simply don't have the same cash-flow buffer as a large businesses, so being paid on time can be the difference between being able to pay staff and not.

"Furthermore, when a small firm is paid late they then can become late payers themselves."

Ms Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "Payment terms can be a major issue for smaller firms, particularly given the financing constraints and uncertainty they face.

"Given the link between this and weak investment, government continues to face questions about what further action is needed on payment terms."

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