David Davis MP writes on how The Conservative Party must support small businesses and entrepreneurs who will drive the UK’s post-coronavirus recovery
As published in The Express:
As we come out of the Coronavirus crisis and begin to rebuild an economy that had come grinding to a halt, the Conservative Party will need to remember its roots. We have always been, and we must always be, the Party of small business, the Party of the self-employed, and the Party of opportunity. It is these core principles that will get the economy back on track.
Small and medium sized companies are the lifeblood of the British economy. They make up 99.9 percent of all businesses in the UK. They employ 60 percent of all workers in the UK and account for more than half of all turnover in the UK private sector. The self-employed are also becoming an increasingly vital part of our economy. They make up 15 percent of the UK workforce and contribute an enormous £270 billion to the UK economy.
These are the contractors building new homes; the plumbers fixing our broken sinks; and the shopkeepers powering day to day life.
It is these nimble, innovative small businesses and entrepreneurs that a Conservative Government should support.
The Chancellor rapidly put in place an unprecedented package of economic support to get the economy through the crisis.
The furlough scheme protected jobs, self-employment support protected livelihoods and grants kept small businesses afloat.
As we move to the next stages of tackling the virus, it is right this support is now being scaled back.
The Jobs Support Scheme, which the Chancellor announced on 24 September, will help businesses get their employers back to work without being burdened with their entire wage bill.
But the original schemes were rushed and three million people in need of support were excluded.
The Chancellor could have used last week’s statement to correct this.
Sadly it was a missed opportunity.
One million, six hundred thousand people are excluded from the Self-employed Income Support Scheme, and 1.6 million people are excluded from the furlough scheme.
This includes people starting new jobs, moving jobs or becoming self-employed.
The largest group of people excluded from the Government’s support are those earning less than 50 percent of their income through self-employment.
This affects 1.175 million people.
This rule had a big impact on people whose pensions are a major source of income.
At a meeting of a cross-party group set up to support those excluded from financial support, a former soldier emotionally explained how her pension is not sufficient to maintain her living costs so when she left the Armed Forces several years ago, she started their own business to supplement her income.
When lockdown arrived her business suddenly halted, she spent her time volunteering to support the community.
Yet, she was left out from any financial support because her pension was more than 50 percent of her income.
The arts industry is another group which has found itself in similar situations.
Singers have had performances cancelled, and theatres are unsure if the pantomime season will be able to go ahead.
The self-employed individuals and the businesses have lost vast amounts of revenue, and it is vital we get this industry back on its feet.
All these groups – small businesses, the self-employed and the arts industry – are absolutely vital to the UK’s economic recovery.
I, and others in Parliament, plan to put pressure on the Government to ensure the gaps in financial support are filled.
Greater financial support will see them through the immediate crisis.
But we also need a proper economic strategy to ensure they can stand on their own two feet in the years to come.
Rishi Sunak has been forced to cancel his planned November budget due to the ongoing public health crisis.
But rumours have been circulating that the Chancellor is considering rises in National Insurance, Capital Gains Tax and a host of other damaging taxes on business.
This would be the worst possible approach at the worst possible time.
National Insurance is effectively a tax on jobs.
A rise would do nothing but curtail any hopes of a boost to employment.
The Bank of England predicts that unemployment will nearly double to 7½ per cent once the furlough scheme is withdrawn at the end of October.
So taxing employment would be utterly disastrous.
What’s more, the 2019 Conservative Manifesto was crystal clear – “We promise not to raise the rates of income tax, National Insurance or VAT”.
We should stick by that promise.
A rise in Capital Gains Tax would be equally misguided as it chokes off investment and growth.
The UK’s tax burden is at a 50-year high.
The economy and people’s wallets simply cannot take the strain of further rises.
According to the Institute for Economic Affairs, a 10 percent rise in taxes would reduce economic growth by one per cent.
In essence, high taxes kill the economy.
Far from raising taxes, the Chancellor should be cutting them to promote growth.
That is what the economy needs now more than ever.
He should be following the example of Ronald Regan who dramatically cut the top rate of tax from 70 percent to 28 percent in the 1980s.
We know that cutting taxes not only promotes growth, investment and productivity – it also brings in more revenue.
When George Osborne cut the top rate of income tax from 50 per cent to 45 percent in 2012, the Treasury brought in £30 billion more in tax revenue the following year.
That is the powerful effect tax cuts can have.
The Government should also combine these Reaganomic tax cuts with Roosevelt-style investment in many, many small-scale infrastructure projects across the country.
Roosevelt’s program achieved the electrification of rural America, built 78,000 bridges, 650,000 miles of roads, 700 miles of airport runways, 13,000 playgrounds, and hundreds of airports.
That is the scale we should be aiming for.
Of course this would cost money and add to our national debt.
But with global interest rates at historically low levels and the economy in desperate need of stimulation, there has never been a better time to invest in big capital projects like this.
When the time comes for a full-scale Budget, the Chancellor must remember our Conservative principles and put in place a bold economic strategy to get our economy firing on all cylinders.
The Conservative Party must not forget its core principles.
We must support the small businesses and entrepreneurs who will drive our recovery.