A Love Letter To Business | Benjamin Woods
In under a month, Rishi Sunak will unveil the budget. The severe economic shockwave from the past year’s lockdowns looms large, and the Tories financial credibility hangs in the balance. In my view, it is the most crucial budget of my lifetime. However, while uncertainty whirls around us, one thing is abundantly clear: Rishi Sunak’s easy decisions are behind him, now for the hard part.
Napoleon once insulted this country, saying we are nothing more than a nation of shopkeepers, and he was right. However, it was not an insult but our strength, and as the son of a shopkeeper, it is a notion I hold with pride. Indeed, the beating heart of our island’s economy lies not in the multinational corporations, nor in the City of London. It lies in millions of small and medium-sized businesses; each individually insignificant to the economy as a whole, and yet each one vital to their communities, vital to their employees, and collectively vital to the British economy.
It is critical then that on the 3rd of March, as Rishi Sunak presents his red briefcase to the press on the steps of number 11, that the next budget contains a love letter to business. A letter to support those who have seen their life’s work slowly drain away in front of their eyes. A letter to thank the forgotten who applauded others. A letter to help those who kept our economy going when everything was stacked against them.
Bold free-market conservative ideas must shine through, and at its centre must be the abolition of business rates, making the current business rate holiday permanent. The income from business rates goes either directly or indirectly to local councils. However, with the recent cuts to local council budgets, it would fall to the treasury to plug the gap as it has done during the temporary business rates holiday brought in last year. It is crucial this measure should not be undone by just replacing it with another tax under a different name. Instead, over the next few years emerging from this deep recession, the balance between taxation on individuals and business should be tilted firmly in favour of business, and the aim of balancing the books abandoned until the economy is back on its feet.
Business rates are calculated on the “rateable value of your premises”, or in layman’s terms, the value of the land your business occupies. When they were introduced in 1990, the world of Google and Amazon had not yet been born. It was a world where it made logical sense for those shops in prime locations along the high street to pay more tax than others owing to their optimal location. But the year is no longer 1990. Three decades on the world has changed, yet our tax system has not. For UK sales in 2020, Amazon is expected to pay a mere 0.37% of its total retail sales in business rates. Contrast that to the ‘bricks and mortar’ retailers who would have paid an average of 2.9% of their total retail sales this year had they not been given a tax break, according to the Atlas Group.
Moreover, it is these ‘bricks and mortar’ businesses that were hardest hit by the pandemic, with the online giants thriving in a world of social distancing and shop closures. So, unlike other tax cuts in areas such as corporation tax, the abolition of business rates would primarily benefit the types of business worst hit by the pandemic. It’s clear the tax system has created an uneven playing field for some time, but the pandemic has turned this upwards struggle for traditional businesses into an expedition up Mount Everest. The question remains how to balance it out?
The Chancellor, now, could do one of two things: he could raise taxes on online business while ending the business rates holiday, a move which would strangle the British economy, or he could abolish business rates and give business the helping hand they so desperately need. The former would drag down those on top, punishing those at the bottom and create a left-wing illusion of fairness where everyone is left worse off. Far from patching up the nation’s finances, such a move would only serve to deepen the crisis; risking lower investment, fewer jobs, higher prices, suppressed wages and a stuttering recovery. The latter, however, would turbo-charge our recovery, spearheaded by the private sector, and launch us into a bright new era for Britain. The gap in the nation’s finances would be filled instead in other ways, such as the removal of the triple lock on pensions, public sector wage freezes and borrowing while the interest rates remain at historic lows.
For the sake of the economy and of millions of small businesses, I hope the Chancellor chooses the latter. Come the 3rd of March, it is vital the Chancellor remembers he is a Conservative, rejects tax rises and writes a love letter to business instead.