Looking towards the UK Spring Budget, an important milestone in the small business calendar – we talk to FSB's Alan Soady about what small businesses want and what the FSB expects from the government in light of crucial issues, such as the cost of doing business crisis.
Guest:
Alan Soady, Head of Media and Communications at FSB.
Looking towards the UK Spring Budget, an important milestone in the small business calendar – we talk to FSB's Alan Soady about what small businesses want and what the FSB expects from the government in light of crucial issues, such as the cost of doing business crisis.
Guest:
Alan Soady, Head of Media and Communications at FSB.
This episode is in partnership with Dell Technologies. Dell can help push your business further, with innovative technology designed for small business. Visit dell.co.uk.
Jon Watkins:Welcome to this special FSB monthly round-up podcast brought to you by the Federation of Small Businesses. This is the go to podcast for news tips and important information for small businesses and the self employed. This episode is brought to you in partnership with Dell Technologies, and is a special small business round up episode dedicated to the forthcoming Spring Budget. Budgets are always an important milestone in the small business calendar. And with the ongoing cost of business cost of doing business crisis. This year's budget will be particularly crucial. So what does small businesses want? And what can they expect? Here to give an overview of that, and what FSB expects from the government? I'm pleased to say I'm joined by FSB's Alan Soady. Alan, good to have you here.
Alan Soady:Hi, Jon.
Jon Watkins:Thanks, as always, for joining us. Let's start by setting the scene a little bit. This is a particularly important budget for small businesses, given the current climate, isn't it?
Alan Soady:It really, really is. And there's an opportunity for the Chancellor here to get those levers pulled, to actually get some growth into the economy. Because so far, technically, the UK has avoided falling officially into recession. But that does not mean that the economy is out of the woods, there is a long road ahead to get economic recovery, and without policies to support growth in there, then there is a risk of just flatlining or even going backwards. And part of the problem, a huge part of the problem, has been alongside the cost of living crisis, the cost of doing business crisis and small businesses in particular facing everything from soaring energy bills, rampant inflation, the highest tax burden for 70 years, plus, then they're seeing both consumers or other businesses tightening their belts because of the cost pressures that they are facing. So the Chancellor needs to really look here and do something bold to unlock all of this to get the growth going. And in so doing ease some of those costs so that there is money for businesses to invest and to grow, and to get the economy moving forward.
Jon Watkins:Yeah, I want to delve into some of the specific areas small businesses should be looking out for when the budget takes place later in the in the month, let's start with tax, what would you like to see change there?
Alan Soady:Well, there's a few things that the Chancellor could do. So that would affect different groups and different ways. We think the business rates, it has long been a very out of date, very blunt tax, it's a tax that applies, before you've made a penny in turnover, let alone profit. And actually, we think that the, the level at which that kicks in effectively should be raised. So you take a lot more small businesses out of business rates by raising the threshold from a reasonable value, as it's called on a property from currently £12,000 pounds, that would be eligible for 100% relief, you take that all the way up to £25,000. It doesn't help everyone who pays business rates, but it would take a lot more small businesses out. We also think that where there is a planned rise in corporation tax, either that should be got rid of, or at least raise the threshold there to take more small businesses out of that planned rise as well. There is currently a plan for fuel duty to go up and that would add about 12 pence a litre to fuel. That is the last thing that small businesses or for that matter consumers need right now. And we're urging the chancellor to cancel that altogether. And then also within the the VAT system, when when Jeremy Hunt did his last sort of big financial statement, he froze the threshold at which VAT kicks in and small firms get dragged into the VAT system, which not only costs money, but also costs a lot of time to do the compliance with and he froze that threshold of £85,000 a year. Now, we would like to see that go up to £100,000. So because at the moment, we're seeing examples of smaller businesses who are just bumping up in their turnover towards£85,000 for the year, who are actually maybe turning away jobs or whatever, and slowing down in their businesses because they don't want to take the risk of going over it. So that is literally stifling growth in that way. And for those who do then get dragged into VAT. It means that there's extra costs and extra compliance and extra time. So again, that is an anti-growth measure by freezing that threshold. We want to see that lifted up to £100,000.
Jon Watkins:Great stuff, the end energy costs and the rising costs of energy have been the big concern, or one of the very big concerns over the last year. What would you like to see from Jeremy Hunt on that?
Alan Soady:Well, this is it. And a lot of people have already been clobbered by this, even despite the help that the government did give, which was welcome. But of course, still people have been having to pay a lot more for their energy. And you've got other small business owners who may have been on a longer term fix where in the coming months that could be coming to an end. And so they get absolutely slapped around the face with a sudden spike in their bills as well. If there is any way the chancellor can extend some of the support that's currently in place that's due to come to an end, at the end of March, I'm sure lots of people would very much welcome that, even if it's a slightly pared down version of what's there now. But I think, longer term, you know, this has also exposed the fact that small businesses do not have consumer-style protections in the energy market. So at least when things were when the prices were initially soaring up last year, although households were feeling feeling it, but there was at least some protection and some level of cap. And initially that did not exist for smaller businesses. So actually, there is scope here to bring in some kind of consumer style protection for smaller businesses in the energy market going forward. And that would protect the longer term. Also, there is a sustainability and energy efficiency element to this. So it again, in the longer term, if small firms are able to do stuff, which makes their business more energy efficient, then that is not only good for the environment, but it's also good for, for bringing down the bills a little bit as well. But of course, that costs money to invest in that kind of energy efficient technology. So we'd like to see the government launch or what we call a help to green scheme where there could be some funding available, maybe a voucher worth up to say £5,000 pounds towards the cost of a small business, moving towards more energy efficient technology. And that's in everyone's interest, because it also helps the government in its longer term sustainability goal towards Net Zero.
Jon Watkins:Yeah, skills shortages and labour shortages have also been hitting many small businesses recently. Is there an announcement you'd like to see around that to sort of alleviate some of the stress that's facing on small businesses?
Alan Soady:Well, what lies behind these skill shortages and labour shortages are all both in many cases, the reasons are many and complex and so are the potential range of solutions. But I'll run you through just a couple that we've we've spoken to the government about that we've been urging them to consider in this budget. One aspect to look at actually is childcare because we think that the free childcare provision, and the tax free provision should be extended. Now, that's good for those who are parents or carers of children, because it potentially frees them up to be able to work more hours if they want to, and therefore that helps with the labour shortage. But it's also going to be good for small business childcare providers who at the moment, many of them are really, really struggling. And because there is a bit of a gap in funding for the free places. So just to just to get into the specifics slightly for a second, we'd like to see what is currently 30 hours free childcare extended so that it covers not just 38 weeks of the year, but 45 weeks of the year because parents and carers have to work not just during school term time, and we'd like to see an increase in the tax free childcare allowance from£2000 to £3000 by the way for nurseries. In England. We'd also like to see all of their small business nurseries taken out of the business rates system, as happens in Scotland and Wales at the moment. There's also a group of people who could be helped back into the labour market where they want to be but are struggling to find opportunities and this group of those who've perhaps been out for quite some time due to a longer term health condition but medically and health wise are ready to go back into the into the labour market who want to, but because they've had that gap can struggle so we'd like to see a kickstart style scheme. You remember, kickstart during the pandemic was to help younger people who were struggling to find work opportunities to get workplace experience we'd like to see that for those who want to get back into work but who've been out of the labour market for a long period of time due to due to health conditions. If we look at skills, certainly there is scope for a greater focus on skills training, vocational education, and apprenticeships and the funding that goes alongside all of that. But also for the self employed. It is good for the economy as well as good for people who are self employed themselves to upskill. And what we'd like to see is where they undertake training which helps to expand their business. We'd like to see that to be tax deductible, so that it's therefore an incentive for them to do it or at least it takes away a financial disincentive for someone who's self employed to upskill themselves, expand their business and in turn be part of generating economic recovery.
Jon Watkins:You mentioned the sort of contribution on the economy there, one of the things we hear a lot is that small businesses deliver the innovation needed to help grow the economy and small business entrepreneurs, by their very nature are innovative, what are you hoping for around innovation in the in the budget?
Alan Soady:Well, you know, part of what we're talking about in terms of bringing down costs and bring down the cost of doing business, and encouraging growth is actually to free up capacity. And money, frankly, for small businesses to be able to afford both in time and money to innovate and to develop and to grow their their businesses. But actually, one of the things that was announced back in in the Autumn Statement by Jeremy Hunt that we were pretty dismayed by was plans to really slash the research and development tax credit system now that to us, struck us as pretty bizarre at a time when surely, as you're striving to grow the economy and get economic recovery, surely you want to be promoting innovation. And we think that the reasons that were behind the government's decision were quite flawed. And we've been asking the Chancellor to delay that and to reconsider that because we think that that is a very, very big mistake. And actually, it's exactly the time that supporting research and development and innovation in that way should be going forward.
Jon Watkins:And one other area, I'd keen to just get your views on Alan, is this issue around late payments for for small businesses, which seems to be getting worse at the moment? I guess, not least, because lots of firms themselves are having cashflow issues, would government action to tackle that the be a be a big help, you know, especially when considered in amongst the overall mix of issues having an impact on economic recovery?
Alan Soady:Well, the short answer to that, John is yes, absolutely would. And you know more than half of small businesses at the moment are affected by late payments, particularly bigger business customers, keeping them hanging on maybe two months, three months, even longer sometimes for work done, or goods that have that have been delivered. And that has a huge impact on their cash flow, and in some cases actually endangers the survival of the business. But if we look at the problem in a in a wider context, and why is there a broader economy argument for the government actually doing something about this is late payments are bad for both growth and productivity on the growth side, because if your cash flow is down, because you've not been paid, and you're owed money, it's money, you haven't got to invest in the short term, if you don't know when you're going to be paid, then you can't plan ahead. So that's holding back the growth of individual businesses who are affected. But there's a productivity drag as well involved in this where it's the sheer time and resources that are wasted by whether or not wasted because the small business owner, of course, has to chase the payment, they're doing absolutely the right thing. But from the economy point of view, that is time and money that could be much better spent with the small business owner being free to, to plan to grow their their business rather than having to constantly be chasing payments that are owed to them, and frankly, should have been paid already. And there are things that Jeremy Hunt can do. And I'm very pleased to say that would not cost the taxpayer a penny. And two of those things are one, make audit committees of big businesses responsible for the business's payment practices. And that needs to get reported in in their annual reports. And so that puts responsibility firmly there around that that boardroom table, but also from the government side. Government spends a lot of money with bigger businesses with when it comes to public procurement when it comes to tax, taxpayer funded contracts. Well, is it right, that taxpayer funded contracts should be going to big businesses that treat their smaller suppliers and contractors really, really badly? We don't think that's what taxpayers would want. And in fact, we've had our own research on this, what the public at large think about this. And surprise, surprise, they do not want their money being spent with bigger businesses that are not good in the way that they treat their smaller business suppliers. So the government could get serious about that and say, Look, if you're a big business, and you're tendering for a government contract, don't even bother, unless you are paying your smallest suppliers within 30 days, and you have good payment practices and you treat your supply chain well.
Jon Watkins:Certainly makes sense and some very clear calls on government there for what FSB would like to like to see in the forthcoming spring budget. Thanks, Alan. That brings us to the end of this small business Round Up for March, a special spring budget episode that was brought to you in partnership with Dell Technologies. And I'd like to thank Alan for that comprehensive run through of what we might see and what we hope to see See, thank you, also to our audience for listening to this episode. While I have your attention, I would just like to remind you that you can subscribe to the FSB podcasts to receive regular updates and guidance on the big issues affecting small businesses and do Please also remember that you can find a whole host of additional webinars, podcasts and other content at the First Voice website, which is firstvoice.fsb.org.uk and on the FSB website, at fsb.org.uk. Thanks for joining us.
Sponsor's message:This episode is in partnership with Dell Technologies. Dell can help push your business further, with innovative technology designed for small business. Visit dell.co.uk.