If the chancellor stands up for small firms, he’ll be standing up for society as a whole
Ever wondered how much small businesses hand over to the Treasury each year? Try £145bn in corporation tax and VAT alone.
Factor in business rates, national insurance contributions, fuel duty, clean air charges and the insurance premium tax, and this big figure becomes, well, astronomical.
We small business owners are resilient. We have continued to make this contribution despite rising costs and political uncertainty taking their toll — confidence among small firms has been in negative territory for an unprecedented 18 continuous months.
As the chancellor stands up to deliver his first Budget on Wednesday, he needs to recognise that, when the government stands up for small businesses, it stands up for society as a whole.
How can Rishi Sunak restore optimism? First, he needs to maintain the incentives that encourage startups to invest and hire.
On Monday, this newspaper splashed on reports that the government may scrap entrepreneurs’ relief — a discount on capital gains tax that small business owners receive when selling their firms — which currently costs the Treasury £2.3bn a year.
Doing so would be disastrous. Not only would it discourage small business owners from growing their firms, but it would also destroy the retirement plans of thousands of entrepreneurs. For many, their enterprise is their retirement fund.
Scrapping the incentive would also fly in the face of a manifesto commitment to “review and reform” the relief. Reform can work: three quarters of those who make use of the relief do so on firms worth under £1m. Restrict entrepreneurs’ relief to the first £1m of business sales, and you’ll protect the majority, and halve the cost. Scrapping it, in contrast, will risk losing entrepreneurs to other climes.
The chancellor should also deliver on the Conservatives’ manifesto pledge to increase the employment allowance, which gives small business owners £3,000 off their national insurance bills. Lifting that cap to £4,000 would allow a small firm to hire four workers on the national living wage without having to pay national insurance contributions — providing some welcome breathing space for employers who have seen pension and wage costs spiral.
Then we come to the nasty stuff: the growth inhibitors that blight our business landscape. Chief among them? Business rates and late payments. The former costs firms £25bn a year. The latter costs thousands of entrepreneurs their livelihoods.
The fundamental look at business rates that has been promised needs to comprise of a downward review of the system as a whole, which simply isn’t working. And sadly the late payments crisis has worsened over the past year, as uncertainty has caused more big businesses to use small firms as free credit lines. We worked closely with the last government to secure a package of measures to bring this crisis to an end, and we’re working with policymakers to resurrect it now.
We’ll be standing up for the UK’s 5.8m small firms right up until 11 March. If this chancellor cares about growth, balancing the books, and levelling up the UK, he’ll stand up for us too.
Main picture credit: Rishi Sunak/Twitter