The Prime Minister also acknowledged concerns that large companies were being allowed to avoid tax and admitted that a £940m job creation scheme had failed to have the desired impact.
When questioned by businesses at an event with businesses, the Prime Minister argued that while 2012 would be a “tough” year he said the “greater truth about our economy” is that many firms and households were in a “financially strong” position.
“A lot of businesses have built up strong cash balances; a lot of banks now have quite strong capital balances,” the Prime Minister said. “Some households, not all, but some, particularly those with mortgages with very low mortgage rates, are in a stronger financial position.
“Yet everyone is holding back slightly. It’s that word: confidence.”
Cameron however rejected calls for more public spending to protect the economy from any further fallout from the eurozone crisis. “If Government did that and saw interest rates rise that action by Government would destroy confidence,” he said.
Questioned as to why HM Revenue & Customs had chosen not to pursue large companies like for billions in taxes when small firms were being targeted for underpaying, Mr Cameron responded: “We need a tougher approach. One of the things we are going to be looking at this year is whether there should be a more general anti-avoidance power that HMRC can use particularly on wealthy individuals and the bigger companies to make sure they pay their fair share.”
Initiatives, such as the Seed Enterprise Investment Scheme encouraging investors to back young firms now made Britain more attractive than the US.
“What we have done this year in 2012, this great year when we have the Olympics and the Queen’s Diamond Jubilee, is put in a place a special rule that if you take money out of a start up [or any asset] and put it into a new start up in 2012 – it is a one-year-only offer – then you don’t pay any tax on it all,” he said.
“I think I am right in saying that you will keep more of your capital, your profit, if you start up a business in Britain than if you start up one in Silicon Valley. “
The Prime Minister also cited reforms to employment laws, such as the extension of unfair dismissal threshold to two years, as evidence that the Government was acting.
He also attacked the “health and safety monster”, promising reductions in accident reporting bureaucracy, fewer regulations and caps on lawyers’ fees for small claims.
Asked about the impact of the announced National Insurance holiday for start ups, which was estimated to support 800,000 new jobs but has so far achieved 12,400, Mr Cameron admitted: “It wasn’t as successful as we hoped. I think it was too complicated, too targeted at specific businesses in specific areas of the country.
“What it points to is that Government needs to do two things: if you keep government’s cost base down you can keep taxes down. You can come up with all the schemes in the world, but there is no scheme as good as controlling your spending, getting your debts under control and therefore keeping your taxes down and, in particular, keep the taxes down that cost businesses when they employ people.”
