Chancellor Alistair Darling announced on Monday he would be temporarily cutting VAT, increasing National Insurance contributions and boosting tax on high earners.
The duty on alcohol, tobacco and petrol will also be rising to offset the 17.5 per c
ent to 15 per cent VAT cut.
Mr Darling said the government would inject an extra £20 billion into the economy to get it moving.
And he said the VAT cut, which comes into effect on Monday in time for the peak Christmas spending, would put £12.5 bn into the pockets of consumers over the course of the 13 months it will last.
Steve Clark, president of the Chamber of Commerce, said, "It's a high risk strategy but these times call for radical solutions.
"I hope it is enough."
The Polegate-based Federation of Small Businesses (FSB) welcomed the new £1billion fund for small firms.
The temporary Small Business Finance Scheme, which will make £1billion available in loans for small firms, closely resembles the FSB's own proposals for a £1billion emergency fund.
The FSB also welcomed plans to allow small firms to offset their losses up to £50,000 over the last three years.
Small businesses will also benefit from the ability to spread their tax payments out across the year on a timetable they can afford, which will bring welcome relief to those firms that desperately need to stabilise their cash flow.
The FSB welcomed the Chancellor's announcement to exempt from tax empty properties on a rateable value of £15,000; and also welcomed the deferral of an increase in the small companies tax rate.
The FSB has been calling for banks to follow the lead taken by the Royal Bank of Scotland, to freeze all business customers' overdrafts for the coming year, and would have liked to hear the Chancellor make firmer commitments to hold the banks to account.
The announcement to cut VAT to 15 per cent will be difficult and costly for some small and medium sized enterprises to implement by next Monday and the FSB is concerned the Chancellor has recouped any benefit of the VAT reduction to small businesses by tweaking fuel duty accordingly.
The FSB was also critical of the increase in employers National Insurance contributions and urged that this is reviewed.
John Walker, FSB National Policy Chairman, said, "This Pre-Budget Report is a sign of the importance of small businesses to the UK economy.
"The Government's Small Business Finance Scheme, which closely resembles the Small Business Survival Fund the FSB has been calling for, will provide a vital cash boost to businesses struggling with rising costs and a lack of credit.
"Many of these measures, such as giving businesses longer time to pay bills and offsetting losses, will give small businesses a welcome breather from the taxman and allow them to concentrate on sustaining their business, supporting their staff and growing the economy in the long term."
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