Former Tory party chairman Lord Saatchi is calling on the government to scrap income tax and capital gains tax for the UK’s smallest businesses.

Lord Saatchi is chairman of the Centre for Political Studies (CPS) which is about to release a report detailing the recommendations targetting businesses with fewer than 50 staff members.

He said the abolition of both taxes will cost HM revenue and Customs £11 billion, but that this cost will be recouped within four years.

The cuts would promote employment, he said, which would drive down jobless claims and increase income tax and national insurance contributions.

The boost would also encourage consumer spending through higher dividends payments to business owners as well as investment in technology, growth and infrastructure.

Removing capital gains tax would allow entrepreneurs to earn more from the sale of their businesses and encourage the transfer of businesses from start-up to the corporate stage.

The report is published on Wednesday. It will conclude: “By allowing profitable small companies to retain more of their earnings it will become easier for them to self-finance their own expansion.”