The Chancellor’s move to scrap the Home Computer Initiative (HCI) has outraged business groups. Sir Digby Jones, Director-General of the CBI, has written to Mr Brown to urge him to reconsider his decision.

The scheme, which was launched in 2004, offers employees the chance to buy a computer through their employer, tax-free. The money to pay for the computer is taken from their pay- packet before tax is deducted.

“This flies in the face of everything the country is trying to achieve on skills,” Sir Digby says in his letter. “Seventy-five per cent of people affected by this change are lower-rate taxpayers. They will want to know why the Government has deprived them, and their families, of this opportunity; and companies will want to know why they have only been given two weeks to work out what to do with their schemes.

“Even the Department of Trade and Industry was in the process of setting up its own HCI scheme and the Chancellor's decision was as much of a shock to the DTI as to everybody else.”

More than 1,250 companies offer HCI schemes and the CBI says that they have been left in a quandary about what to do next.

Simon Briault, of the Federation of Small Businesses, said: “The Budget didn’t offer anything positive for small businesses. Instead, the Chancellor introduced annoying measures, such as scrapping the HCI.”

Mr Brown did score brownie points with medium-sized firms by extending research and development tax credits for companies with between 250 and 500 employees. However, many small businesses employing fewer than 250 people were disappointed to be excluded from the reliefs.

Another measure that received a lukewarm reception is a pledge by the DTI to cut down the number of business support organisations from more than 3,000 to 100 in the next four years.

“While this is a welcome move, it is not something to shout about,” Mr Briault said. “It still won’t be very centralised, and there will still be huge amounts of confusion. There needs to be a centralised point for all enterprises to find what they need. The system needs to be less time-consuming and to instil confidence.”

Andrew Moulah, of the Forum of Private Business, was more dismissive. “High-growth SMEs who use these type of services are a very small proportion of the 4.3 million small businesses in the country, so this measure is not that helpful.”

The Chancellor has had some measure of success with a promise that he delivered in last December’s Pre-Budget Report. From next week, all businesses turning over up to £1.35 million will be able to join the annual accounting VAT simplification scheme, which allows businesses to complete one VAT return instead of four each year. Until now, only firms turning over between £150,000 and £660,000 had been eligible.

Another VAT simplification recommended in the Pre- Budget Report - concerning raising the turnover ceiling for companies that pay VAT when paid by their customers, rather than when they raise an invoice - awaits a decision from the European Commission.

“We welcome Mr Brown’s pledge to cut bureaucracy by 25 per cent, but these are very strong words and it is a very strong commitment. We want to see the effects, not just listen to rhetoric,” Mr Moulah said.

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