Tories: 1p cut in National Insurance to help firms

The reduction in payroll tax would save a small business with four staff about £100 a month over a six-month trial period, he claimed.

His move, announced at a summit with small-business leaders, came as the political focus turned from the £500 billion banking bail-out to the imminent danger of massive job losses and home repossessions.

The plight of small firms, hit by punitive 15 per cent bank loan rates and costly red tape, was rising rapidly up the agenda. Mr Cameron said: "Good small firms will be going to the wall unless we give them help." He said the Tory proposals targeted "the most vulnerable" micro firms: "It would help keep them to keep their employees and get through an extremely tough time."

The Government has signalled it would delay plans to allow 4.5 million parents to demand flexible hours, even though the promise, to people with children under six, was approved by the Labour conference only last month and trumpeted by Gordon Brown.

Business Secretary Lord Mandelson has ordered a review of all Labour promises that could load extra costs on struggling firms. Other plans that could be sacrificed may include extending paid maternity leave from 39 to 52 weeks and an extra bank holiday. Mr Mandelson's department would not comment.

A new poll showed the Tory lead has been whittled down to eight points less than half what it was two months ago in the wake of Mr Brown's plaudits for the banking rescue.

The YouGov poll in the Mirror put the Conservatives on 42 per cent, Labour on 34 and the Liberal Democrats on 14. It found six in 10 felt Mr Brown had handled the financial turmoil well compared with a third who said he had done badly. Some 40 per cent backed Labour to handle the economy, compared with 28 per cent preferring the Tories.

Treasury minister Yvette Cooper said small businesses were one of Labour's top priorities. She told GMTV: "Banks are not lending to each other or to the rest of us. In particular that means not lending to small businesses." The Government also urged banks to give extra time to home-owners falling behind on mortgage payments, in the hope of curbing repossessions.

Chancellor Alistair Darling said he aims to use his next Budget to spend Britain's way out of recession, including bringing forward big construction schemes to stave off job losses.

Mr Cameron, who invited small firms bosses to a seminar in the Commons, yesterday proposed a VAT holiday for small and medium-sized firms, which he called the "lifeblood" of the economy.

WHAT THEY'RE PROMISING SMALL BUSINESSES

Conservative

●A 1p cut in employer national insurance for six months for those employing four or fewer staff. A business with a £150,000 annual wage bill could save more than £100 a month, equal to 15 per cent interest on an £8,000 overdraft. Cost: £225million.

●Deferring VAT for six months for small and medium-sized firms.

●Cutting small companies' corporation tax rate to 20p over time. It is now 21p and due to increase to 22p in April 2009.

Labour

●Ordering government and councils to speed up payments to small firms and contractors to ease cash-flow problems. 10-day target in the public sector with pressure on private firms to follow suit.

●Flexitime plans for 4.5million parents will be delayed until the downturn ends. Longer maternity leave could also be shelved to ease costs on companies.

●Budget to bring forward major construction projects to stave off job losses in the building trade.