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Published in Progressonline on 21st Feb 2017
The merciless shrinking of the public sector, austerity and the downward pressure on wages and secure working conditions has resulted in a huge rise in self employment and new businesses, reputedly 80 new companies being born each hour in 2016. Due to Government changes to business rates, these brave new entrepreneurs are now facing both a rise in their tax payments and the loss of opportunity to appeal poor assessments; it will cripple many of them. Labour have the opportunity to be the champion of Small and Medium sized Enterprises by developing a fairer system of business taxation that would allow them to flourish and enrich our local communities.
15.7 million UK people work for Small and Medium sized Enterprises and they all know how unfair business rates are and how much that tax affects their incomes. Many were thrown out of their previous salaried jobs by the recession as well as the Tory’s remorseless destruction of the public sector and many might previously have self identified as working class, perhaps they still do? Whatever they see themselves as, they vote and they do not yet see Labour as championing their cause.
99.9% of UK private sector businesses are SMEs and they account for 47% of all private sector turnover, thats £1.8 trillion ( £1,800,000,000,000) in 2016. Three quarters of those businesses have no employees apart from the owner and many of them function as sole traders. Bearing in mind the shrinking public sector and the dramatic and continued rise in the private business population, isn't it time we (Labour) tackled one of the key issues which is so adversely affecting SMEs?
The issue of unfair business rates occupies the minds of many of the people whose doors I knock: They run nail bars, dog grooming, clothes shops, newsagents, carpet fitters, engineering shops, bathroom fitters, print shops, cafes etc etc. The one thing they all have to pay is business rates and they are fed up with paying at a higher rate than bigger companies such as Tesco, Argos, warehouses and online businesses. Quite frankly the current system has also helped to damage our high streets and turn them into rows of empty windows and charity shops. It is often business rates that are to blame for keeping staff on minimum wages and low skill apprenticeships.
The business rate ‘multiplier’ system has never been fair but I suspect it remains because no government has ever had the nerve to mess with what is a reliable and regular income. It is calculated simply by setting a percentage each year of the rateable value; ie the higher the rent, the higher the business rates. When you consider that large business properties usually pay less rent per square foot you can see that they will also be dealt with more lightly than SMEs which may only need a small shop or office. The smaller high street property will be hit with higher business rates due to the higher rent per square foot.
The likes of the infamous Sir Phillip Green would like to influence the Government to set a fixed percentage, to remain the same year on year, by which to calculate business rates. That would suit the big corporations very well and allow them to plan their tax arrangements to their advantage no doubt but it will do nothing to alleviate the problems experienced by the majority of our business community. In fact the threat of new and imminent higher business rates is worrying many SME business people right now but it is the big corporations that the Government are listening to..
A far better approach would be to tax SMEs on their profit margins rather than on property prices: This would be fairer to all businesses, large and small and encourage payment of higher staff salaries. For those start-ups that barely manage to pay their own wages they would pay little but as the business thrived their tax payments would go up. This would also benefit businesses such as pubs in areas where property is expensive, this is particularly the case in London and the South East where there have been far more pub closures than other parts of the country in large part because of the high business rates. In the current system business people are effectively being hit twice by high property prices, once through their rents then again through business rates.
Corporation tax is being cut to ridiculously low levels, Down from 20% to 17% by 2020, while SMEs have been begging for years for the business rates to be made fairer. One might almost imagine that the Conservative Government want to give preferential treatment to multinational companies based in tax havens rather than support and stimulate our brave homegrown entrepreneurs. Yes there would need to be changes as to how council services, such as Social Care, are funded but that area needs a complete overhaul anyway to repair the damage that this Tory Government has done.
Hanging on to a form of taxation that was first imposed in Tudor England, just because the Treasury wants an element of stability to its income and is willing to sacrifice local businesses is not a good enough reason to continue such an unjustifiable burden on SMEs. Unleashing the power of our SME entrepreneurs would be a genuinely beneficial force to boost our economy and to give our high streets the chance to become lively social and economic hubs. It will create better paid jobs and pump money through our home communities. Not least it would send a message to the many millions of people who used to trust Labour to do the best for them, that we are on their side and fighting one of their key battles for them. Labour would once again be the champion of business, industry and thriving local communities.
Figures from Department for Business, Innovation & Skills.
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