With less than seven weeks to go till the General Election, you might be wondering what the main political parties have promised for entrepreneurs. Are there some real business incentives in there, or just more of the same, and is it likely to help or hinder your growth?
Business taxes and red tape
From corporation tax to business rates, government levies can make a huge dent in company finances, so it’s good to know what the main political parties have in store in terms of taxes.
Labour’s pledges are all about the little man, as they promise to cut business rates for 1.5 million small firms. Business rates have been a thorny subject in recent years, with small businesses claiming that they’re disadvantaged by outdated rateable values on properties that they rent, and smaller commercial landlords struggling to attract tenants because of restrictive rates. Many entrepreneurs who need physical premises to run their small business, also feel that they’re paying an extra tax compared to large internet companies who don’t need a bricks and mortar shopfront. So it goes without saying that this will be a popular move with small businesses but maybe not so much for the larger firms who could be funding this cut. The extra cash has to come from somewhere after all and Labour’s plan to replace the deficit is to cancel the Conservatives’ cut to corporation tax, which will reduce it from 21% to 20%. The cut, which will come into effect next month, will see the UK gain one of the lowest rates of corporation tax worldwide.
The Conservatives have acknowledged the business rates issue, however, and the sweetener they have offered is to double rates relief until next year. The Liberal Democrats have also acknowledged an issue with the current business rates, although they’ve stayed vague with their promises, hinting that they might look for an alternative altogether.
Unnecessary bureaucracy is a big bugbear for most business owners, so you might be relieved to hear that the Conservatives have vowed to reduce red tape for SME’s by removing unnecessary health and safety regulations. They’ve made a start on this by announcing the abolition of the annual tax return in the budget. Instead, it’s to be replaced by a digital account that can be logged into throughout the year, a move that will probably be welcomed by most small to medium sized businesses.
Incentives for employers
George Osbourne also announced in the Budget that he will scrap Class 2 National Insurance contributions, in a bid to create less red tape for the self-employed, and the Conservatives have adhered to their pledge to eradicate National Insurance, both employers and employees, for anyone under 21, and all apprentices under 25. This should relieve the administrative burden of employing staff, as well as offering a financial incentive for employing young people in terms of the employers national insurance contributions that will be saved.
Labour have made their own pledge to support apprenticeships, guaranteeing that any school leaver who gets the requisite grades – the equivalent of 2 A’Levels – will be entitled to a place on an apprenticeship by 2020. Over a third of these apprenticeships – an estimated 33,000 – are expected to be provided by the construction of the HS2 rail link and the remainder will be created by insisting that any firm that bids for public sector contracts must offer two year apprenticeships. This is bound to be viewed as a controversial move amongst SME’s, with many feeling that there are already so many barriers to public sector tendering that the contracts always tend to fall in the hands of the select few. Ed Milliband has also promised to raise the minimum wage to £8 per hour, and he is offering tax breaks for firms that pay the minimum wage although it’s not clear what these will amount to yet.
North-South Divide
Devolution is the hot topic on everyone’s lips, and a topic that’s close to our hearts here in Yorkshire. The Conservatives expanded on their ‘Northern Powerhouse’ plans in the Budget, but the general consensus is that it’s something of a letdown for West Yorkshire. George Osbourne has offered a devolution deal, which promises greater control over transport, skills, housing and small business support. But it’s not on the same scale as the deal promised to our counterparts over the Pennines and generally it has been met with disappointment. As part of their devolution deal which includes a £6 billion health and social care plan and a far greater degree of fiscal autonomy, Manchester will get to keep 100% of the business rates growth generated in the city. This was the kind of move that West Yorkshire was hoping for, along with fiscal devolution and much greater control over our own budgets, but despite acknowledging that Yorkshire creates more jobs than France, these moves haven’t materialised.
In a nod to the innovative ventures that have come out of the North in recent years, the Chancellor has pledged to invest £11 million into entrepreneur hubs in Leeds, Manchester and Sheffield, and he has also given the green light to HS3, the high speed rail line between Leeds and Manchester.
The coalition have deemed that the Regional Growth Fund has been a success so it’s expected that it would continue under a Conservative Government, and the Liberal Democrats have already stated their intention to keep the funding scheme going
Labour have made their own pledges about devolution, with Shadow Chancellor, Ed Balls, promising to devolve £30 billion of public money to the regions over the next five years. He has also pledged that any combined authority in the country, regardless of whether or not it had an elected mayor,would get to keep 100% of the business rates generated by economic growth in its region.
Exporting to China
Last week’s budget did provide a welcome boost for exporters, as George Osbourne pledged an additional £7.5 bn for UK Trade and Investment, the body which works to promote British exports and attract inward investment. The cash boost will be specifically targeted at exporting to China, as its economy is growing at the staggering rate of more than £600 bn per year. The cash boost will be particularly focused on sectors such as creative industries, education, energy, financial services, advanced manufacturing, healthcare and life sciences, as these are areas in which the UK has a reputation of excellence. Yorkshire’s exports are currently worth around £13 bn per year, and the export market is growing all the time, so this is an initiative that has the potential to have a very positive impact on businesses in our region.
Boosting banking choice
In terms of finance, Labour are keen to set up two challenger banks, giving the main five a run for their money, and hopefully offering more choice for account holders, businesses and borrowers. Labour have also pledged to create a British Investment Bank, specifically aimed at funding for small to medium sized businesses – the funds for this would come from the increased license fees in the mobile phone sector. Any initiative that unlocks more funding for small to medium enterprises would be welcomed, although the full details of this have yet to be unveiled. Labour have also promised a one-off tax on bankers bonuses to fund their compulsory jobs guarantee for young people, and a clawback on banking bonuses that were paid inappropriately, anytime up to ten years ago. And in a particularly good move for the alternative finance industry, which is expected to be worth £4 bn by the end of this year, Labour have pledged to extend the levy on the profits of payday lenders to raise the funding for alternative credit providers.
The policies that have really hit the headlines have centred around the bedroom tax and the NHS, but hidden amongst such controversial pledges are some promises that look like they could improve businesses and encourage enterprise of all sizes. It’s good to see some of the hot topics , such as supporting innovation in the North and business rates, being addressed, one way or another, by all of the main political parties.
Get in touch!
Having spent the last 10 years, advising, investing in and funding companies, as well as setting up one or two of my own, I’m well aware of the difference that changes in legislation can make to individual business success and hopefully whoever gets into power will create the right balance to help entrepreneurial spirit to flourish. If you want to ‘chew the fat’ over how legislation could affect your business or have any other funding needs and questions then drop me a line at matt.haycox@accessfinanceuk.co.uk or call our offices on 03330 069141.
