Labour Party Leader Keir Starmer and The Institute of Directors (IoD) have something in common. They are both calling to put entrepreneurs at the heart of the recovery, and avoid damaging tax hikes. However, just days after the IoD put out its Budget proposals, there are reports that Rishi Sunak is set on hiking UK corporation tax in his March Budget speech. The golden ticket will be £12bn in government revenues over the next three years.
According to a City AM report, Sunak will use the extra funds to chip away at the liabilities connected to the government’s Covid-19 support programmes. The corporation tax rate will reportedly jump from its current 19 per cent to 23 per cent. One per cent may have been palatable for most of the country’s small businesses, but a leap to 23% even if staggered is a substantial leap.
Better Vision for Business?
Starmer, as opposition leader, claims he has a better vision for British business. He said in a recent speech (see Twitter clip below) that if he were voted in as Prime Minister he would introduce Covid recovery bonds and would set up funding for start-up loans to help create 100,000 small businesses.
But would theses startups be backed on a blind first-come-first-serve basis? Or go through a much more vetted process, one not unlike when a startup management team pitches to investors? A process that taxpayers could get behind rather than a free for all.
As well as calling for an extension of measures to deal with the ongoing economic impact of Covid-19, the Institute of Directors is also calling for a stimulus package to unleash investment in start-ups and scale-ups through targeted reliefs. In the year of COP26 the Institute is also urging help for SMEs to play their part by setting up a new Digital & Green Recovery Credit, to accelerate their investment in technology and carbon reduction.
Time to ‘grant’ the Excluded support
The IoD’s budget submission calls on the Government to provide a grant package to the millions of owner-directors who have been without significant financial support for almost a year. Alongside a temporary relief for employers’ National Insurance Contributions, as an option to ease business costs, the IoD called on the Treasury to help entrepreneurs drive the recovery by not raising Corporation and Capital Gains taxes, as some reports suggest.
To help businesses and the economy to adjust to the post-Brexit landscape, the Institute pressed the Government to issue:
- Brexit adjustment vouchers for SMEs and significantly increase DIT’s resource to help businesses make the most of trade agreements
- Reverse the decision to scrap duty-free shopping for visitors to the UK.
- The IoD also urged the Government to put ‘levelling up’ into action, by accelerating the roll-out of faster broadband, investing in R&D, and incentivising retraining.
“Entrepreneurs need to be at the front and centre of the Government’s recovery plans. Businesses will be creating the jobs and driving the innovation that the economy needs to rebuild—and this Budget must support them,” said Jonathan Geldart, Director General at the Institute of Directors.
He continued, “With battered balance sheets and ongoing restrictions, it is paramount the existing package of grants, loans, and reliefs are extended. A cliff-edge in support would be disastrous for business. Also, it is high time the millions who have not qualified for significant income support, like owner directors, are given some reprieve.”
Geldart said now is not the time to be experimenting with higher taxes.
“Tax hikes right now risk choking off the economic recovery before it has even got started. Instead, the Budget should put a shot in the arm of entrepreneurs by providing reliefs to drive-up investment in enterprising businesses and encouraging small firms to invest in technology, retraining, and green growth. Slashing the burden of business rates and employers’ NICs will also help create the margins for firms to hire and rescale,” he said.
More on the IoD’s Budget recommendations:
- Extend the existing Covid-19 economic support measures as long as restrictions continue, and provide a one-off grant package for owner directors who have missed out on support.
- Put off major tax increases, while introducing a temporary employers’ NIC contributions cut and targeted business rates relief for the most affected sectors and for firms improving or expanding their premises.
- Boost funding for scale-ups and start-ups by easing restrictions on the Government’s Seed Enterprise Investment Scheme and Enterprise Investment Scheme, doubling the maximum company investment threshold on the former.
- Encourage wider investment by creating a new temporary Digital & Green Recovery Credit, to support spending in technology (e.g. software, data and IT), carbon reduction, and retraining, and extending the £1million Annual Investment Allowance cap beyond the end of 2021
- Broaden the scope of courses under the Apprenticeship Levy, expand digital, management, and leadership training opportunities, and suspend the Immigration Skills Charge for small businesses
- Deliver more targeted financial assistance for Brexit adjustment, either by making such activity tax-deductible for SMEs, or by introducing a voucher scheme.
- Reverse the decision to scrap duty-free shopping for tourists and visitors to the UK
- Significantly increase DIT’s resource to help businesses make better use of existing and future trade agreements
- Invest in accelerating the rollout of faster broadband, develop regional business support hubs, and encourage stronger links between universities and local businesses.
For full details, read the IoD’s Budget 2021 Representation