The Conservatives describe themselves as ‘the party of enterprise and of the entrepreneur.’ Labour say they are ‘the party of small businesses.’ Tim Farron says: ‘The Conservatives have lost the right to call themselves the party of business. The Liberal Democrats are now.’ All parties acknowledge that small and medium-sized enterprises (SMEs) are crucial to the economy. So which one will actually help small businesses the most?
All three major national parties have a plan for corporation tax. The Conservatives are lowering it to 17%. The Liberal Democrats will put it back up to 20% and will consult on shifting from a profits-based tax to one based on sales and turnover. Labour will raise corporation tax but will ‘reinstate the lower small-business corporation tax rate’. They don’t confirm Jeremy Corbyn’s previous commitment to not increase corporation tax for small businesses (no doubt they will be pressed on this). Labour will scrap quarterly reporting for businesses with a turnover of under £85,000.
“I will do such things- what they are yet I know not” King Lear
All three are definitely going to reform business rates but, as so often in the past, all three are vague on exactly
how and when. Labour will start by switching from RPI to CPI indexation and exempting new investment in plant and machinery from valuations but they intend a full ‘review’. The Lib Dems and Conservatives promise reviews that recognise the development of the digital economy and ensure high streets remain competitive. The Lib Dems will also consider the implementation of Land Value Taxation. The Conservatives want more frequent revaluations and will explore the possibility of self assessment. They also say they will simplify the business tax system.
Along with rates, the wages bill is often a disproportionately large burden for a small business. Under the Conservatives, the National Living Wage will rise to 60% of median earnings by 2022. Labour will put the living wage up to £10.00 per hour by 2020 but will establish a new employment allowance for small businesses that struggle to pay a higher living wage. The Lib Dems don’t come up with a sum but promise to set up an independent review to ‘consult on how to set a genuine Living Wage’.
“Neither a borrower nor a lender be” Hamlet
Small businesses often find it difficult to get bank loans. Labour’s new National Investment Bank will identify and fill gaps in lending by the commercial banks. In particular it will provide ‘patient, long-term finance to R&D-intensive investments’. The Lib Dems too want to help entrepreneurs and small businesses have access to the funding they need and, those familiar words, ‘long-term (and patient) capital’ They will get the state-owned British Business Bank to help by ‘tackling the shortage of equity capital for growing firms and providing long-term capital for medium-sized businesses.’
The Conservatives are aiming for government investment in research and development to rise to 2.4% of GDP within ten years.
Late payments plague small businesses. Both the Conservatives and Labour say that anyone bidding for a government contract will have to pay its own suppliers promptly. Labour will introduce a system of binding arbitration and fines for persistent late payers.
If you run a tech company, you may like Labour’s idea of a Digital Ambassador who will ‘promote Britain as an attractive place for investment and provide support for start-ups to scale up to become world-class digital businesses’. Will the ‘support’ be financial or simply advice? We don’t know.
“Put money in thy purse” Othello
If you’re starting a business, the Lib Dems’ plan for an allowance to help you with your living costs in the first crucial weeks may impress you. This will be £100 a week for up to 26 weeks.
Micro businesses will benefit from the Tories’ energy tariff cap. Small businesses worried that their source of skilled labour will dry up as immigration is cut are promised by the Conservative Party that the Government will be issuing plenty of visas to skilled migrants in ‘strategic industries’- but also doubling the levy on them.
Every day we complain about ‘red tape’ and every election the parties promise to reduce it. Let’s just say all parties promise to reduce red tape.
So all the parties have plans to help small business but there’s an elephant in the room, a European elephant. Whatever the government does to help or hinder our ability to do business, the effect will be dwarfed by what Brexit does to the economy. If the economy booms and we make more profit, we can cope with more costs. If it tanks and we don’t make enough money, no amount of benefits will stop us going under. The Conservatives want ‘a comprehensive free trade and customs agreement’. Labour want to retain ‘the benefits of the Single Market and the Customs Union’. The Lib Dems want us to stay in the single market. So, when it comes down to it, your vote should probably go to whoever you think will get the best result for your business from the Brexit negotiations.
This commentary is written by Paul Lewis of Seven Experience and expresses his personal view.