View from the Chair: Stakes could not be higher for Chancellor’s first budget

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After weeks of speculation and the flying of kites as to what might or might not be included, the Budget is now only a day away and the stakes could not be higher.

It will certainly be historic, as it will be the first-ever to be delivered by a female Chancellor of the Exchequer; but it may also go down in history for the long term, direction-changing impact it will have on business and the economy. We have heard suggested figures of the sum the government wants to raise – whether to plug a black hole or to provide a war chest to do other things – but it runs to tens of billions of pounds. Against that backdrop, business is extremely nervous.

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In parallel, the government is also proposing a raft of new employment laws which, whilst promising new workers’ rights and opportunities for trade unions to strengthen their role, offers little to support innovation or actual growth. There is a real risk that these two massive interventions will conspire both to layer on costs, and extract wealth from the smallest firms throughout the economy.

A new government has a mandate to bring about change. FSB has a mandate to speak up for smaller businesses; to call for beneficial changes in legislation; and to resist poor or damaging new laws and taxes. In this context, we have been meeting with the Chancellor and other ministers in recent days to press our call for a decisively pro-small business Budget, which avoids introducing any damaging, anti-enterprise tax rises and, instead, helps entrepreneurs to invest, employ and get growth back to where it should be.

View from the Chair with FSB NI’s policy chair, Alan LowryView from the Chair with FSB NI’s policy chair, Alan Lowry
View from the Chair with FSB NI’s policy chair, Alan Lowry

Specifically, we have been making the case for an increase in the Employment Allowance - a relief from some of the Employers National Insurance contributions that act as a direct tax on jobs. Get this right, and small businesses will continue to employ staff and grow the economy, which is what government wants to see. We have also called for a reintroduction of the Statutory Sick Pay small employer rebate, which would help enable employers to cover the cost of staff absences.

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Another key demand FSB has highlighted has been developed in response to some of the rumours that have been allowed to run amok over recent weeks, around a raft of business stealth taxes. This call is to protect Entrepreneurs' Relief, which currently encourages owners to retain funds within the business and grow it to maximum potential, benefiting from the relief on disposal of the business. Retaining it would provide vital financial security to small business owners when they sell their business, encouraging more people to take the leap into entrepreneurship. Research shows that 83 per cent of small business owners plan to use this relief in the future, so removing it risks stalling business creation and discouraging growth when it is most needed, by those who have a track record in successful delivery.

In a similar spirit of laying foundations to encourage genuine bottom-up growth, we have also urged the Government to take decisive action to give small businesses confidence to invest by increasing protection for those entrepreneurs who put their houses on the line to release funds to grow their business, by stopping the unscrupulous blanket use of personal guarantees on loans. This was done to support business during the pandemic so there is precedent for it.

The government’s stated aim of achieving growth is one with which no one would argue, as the fruits of that growth benefit individuals and society as a whole. But simply stating an ambition for growth doesn’t secure or achieve it; there is a need for thoughtful, careful policies that inspire entrepreneurs to take risk, to start and grow businesses, that employ people and pay taxes.

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This week’s budget will take less than an hour to deliver but its effects could last for a generation. If it is a re-distributive levying of taxes and other burdens on those who risk their capital and deploy their energy and ingenuity to create wealth, then it risks doing untold damage. But if, instead, its effects are positive and are an investment in securing real growth, then it will be judged a great success. An immense amount hangs on this historic budget.

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