Writing in yesterday’s The Observer, the Tory party leader also said that councils should be encouraged to reduce debtor days to 20 rather than 30 days and that banks have to understand that it is their duty to unblock the credit channels, treat small businesses fairly and stop the mass march to insolvencies.

Cameron said: "Britain’s small businesses need our help… Small and medium sized businesses employ over 13 million people and turn over £1,440bn a year."

Also contained within the Conservatives plans to protect the lifeblood of the UK economy is a 1p reduction in National Insurance payments for businesses that employ less than four people.

Andrew Brown of the BPIF welcomed the proposal. "Any measures that release additional cash for small businesses has to be welcomed," he said. "However, presumably there would have to be a cut in public sector spending at the same time."

Cameron’s article comes as Alistair Darling announced that he is preparing to ramp up public sector spending in a bid to boost the economy. The Keynesian move follows Derek Simpson of Unite’s call for such a policy last week.

The Federation of Small Businesses (FSB) welcomed both plans. National chairman, John Wright, said: "A VAT holiday would provide welcome relief to the UK’s 4.7 million small businesses who are struggling with rising costs."