The county's small businessmen and women have pledged to fight any attempt by the government to operate tax credit through wage packets, which they say is an invasion of employee privacy.

They say they should not be regarded as a social-welfare arm of government.

Mr Terry Taber, spokesman for the Essex branch of the Federation of Small Businesses, was making the pledge in the wake of last month's Queens Speech, to which it gave a mixed reception.

The FSB was pleased with the announcement of a Competition and Enterprise Bill, aimed at promoting enterprise and improve competition laws, and also welcomed a new flat rate of VAT for smaller businesses and the removal of automatic VAT fines.

"The FSB is hopeful that this Bill will include clauses to remove the Crown's preferential right to recover unpaid taxes ahead of other creditors," a spokesman for the Federation said.

But it was the proposals to introduce a Tax Credit Bill, which has caused concern, just as the operation of the Working Families Tax Credit, which it says is already posing great problems for small employers because it is operated through the pay packet.

Terry Taber said the idea had caused grave concern among members.

"We will be voicing our opinion as loudly as possible. Businesses should not be treated as a social-welfare arm of government.

"It is an invasion of employee privacy, and a major distraction from business wealth-creating activities. Government benefits should be paid by, and administered by, the Government," he claimed.

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