IN its submission to the Chancellor of the Exchequer ahead of the spring budget, the Federation of Small Businesses (FSB) has called for a pro-business budget that boosts jobs and long-term growth.
Recognising tight public finances, the Chancellor should use the budget to show he backs British businesses to improve job creation and drive productivity across the nations and regions of the UK.
While small business confidence has rebounded to levels seen at the start of 2016, growth prospects for small firms are falling as they face the challenges ahead. The FSB’s new analysis shows that the average FSB employer will face £2,600 in additional employment costs from Government policy in the 2017/2018 tax year. The increase is fast accelerating as small firms face an ongoing increase in the national living wage, doubled up with a resulting rise in National Insurance contributions.
In addition, pensions auto-enrolment, which the very smallest employers have to comply with, is already about to rise. This triple hit has left many members wondering how they are going to meet the extra costs, and could stop others from creating jobs altogether.
Mike Cherry, the FSB’s national chairman, said: “Spring budget 2017 is a critical moment for the Government to show it is unashamedly pro-business, and that the Chancellor recognises that small businesses are the engines of job creation. Spiralling labour costs are now threatening their growth ambitions and hiring intentions. The Employment Allowance, created under the previous administration, has been a huge success and now it’s time for this Government to build on that and help us create the new jobs and growth this country needs.”
Since the turn of the century, the number of people who work for themselves has grown by 40 per cent to 4.8 million people. The contribution to the economy made by the self-employed has grown considerably, as more and more people have set themselves up in business. At spring budget 2017, our growing entrepreneurial culture is on the line. The Government’s approach to the self-employed will define just how pro-business it is.
“A statutory definition for this group is long overdue, and we welcomed the announcement of the Taylor Review last October and will work with Government to ensure that it provides real and lasting clarity for the self-employed.
Mr Cherry continued: “The FSB was established to champion the interests of the self-employed. At the spring budget, our entrepreneurial culture is on the line. There are a number of ways spring budget 2017 and the Taylor Review could help.
“The FSB seeks a statutory definition of self-employment, changes to the social security system so that it better reflects today’s economy, Universal Credit to be responsive to income fluctuations, and incentives to help the self-employed pay for their retirement.
“In short, we need more people to set themselves up in the business, not less. The risk these local business leaders take should be reflected in the tax system, so that we build on the 5.5 million record high level of small businesses in the UK.”
At the start of this year, small firms were expecting confirmation and details on how to comply with the Government’s plans on making tax digital. But just last week, HM Revenue and Customs announced further delays on key decisions, including the exemption threshold and the implementation timetable.
Mr Cherry added: “We have been deeply engaged with ministers to try to change these reforms and make them work. Originally planned for 2018, the delay in decision-making means that small business owners have no idea how they will meet their tax obligations next year.
“The spring budget is the moment for the Chancellor to announce that the scheme will be implemented in 2020, after thorough piloting, user-testing, communication and help for those who will fall foul of any new obligations. There should also be an increase in the turnover threshold to £83,000 to match the VAT threshold, which removes those businesses that will struggle the most.
“Finally, we seek focused help and support on software and for those who are digitally excluded and therefore likely to be non-compliant. Rushing in this change just as businesses face Brexit is a headache that small business owners just don’t need.”