Call for Government to rethink plan for Britain’s small businesses

The Business and Trade Committee has asked the Department to reconsider the Government’s ‘inadequate’ response to proposals to improve UK plans for small business growth.

In February of this year the Committee reported that small businesses across the UK were facing cost pressures comparable to the conditions of the pandemic, but without pandemic-style support packages. As a result small business are closing their doors at a rate that threatens high streets and growth across the economy.

The Committee is pushing back on a Government response that “restates pre-existing schemes and commitments” and only fully accepts six out of 36 of the Committee’s recommendations – after an inquiry that heard scores of small businesses describe the cumulative burden of policy decisions taken “with no regard for their combined impact on SMEs”.

On tax, the Committee says Treasury ministers have failed to engage with recommendations on business rates, VAT and tax administration, leaving major problems “unaddressed”. Research from Professor Ben Lockwood shows that a “1 percentage point reduction in the tax rate reduced the vacancy rate for eligible properties [on high streets] by 5%”.

Since the report was published, the Federation of Small Businesses has described a new “cost crunch” as energy standing charges rise by 40%, business rates are expected to increase 52% over the next three years, while minimum wage and Statutory Sick Pay costs also rise.

The Committee has particularly serious concerns about the response in six key areas, where it calls for an urgent rethink and fresh proposals from Government to ward off cost pressures that will only worsen otherwise – an unsustainable, unacceptable prospect.

It says Government must bring forward with a whole new response, within two months, with better proposals on procurement, tax, energy costs, the cost of crime, bogus self-employment and protections for franchisees.

Rt Hon Liam Byrne MP, Chair of the Business and Trade Committee, said “Small business is the backbone of Britain’s economy, but too many now feel they are carrying a burden that is becoming impossible to bear.

“When we published our report in February, we warned that many firms were facing cost pressures comparable to the pandemic. Since then, those pressures have only intensified. We welcome the Government’s willingness to listen in some areas but too often it is repeating existing announcements, not confronting the problems businesses told us about first hand.

“Growth begins with small business. If Britain is serious about growing the economy, reviving our high streets and creating good jobs, we need a bolder, more ambitious plan to help small firms invest, hire and thrive. That is why we are asking ministers to think again and come back with a response that rises to the challenge.”