Disaster for small business

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This article was first published on Progress Online.

10 March 2017

The increase to national insurance contributions in this year’s budget is yet another Tory assault on small businesses and entrepreneurs, writes Ibrahim Dogus

This week’s budget has proven to be the disaster for innovative, small businesses that many had feared. Once again, this government has demonstrated its complete disregard for small and medium sized enterprises and its corresponding enthusiasm for faceless, giant corporations. Under the new budget, business rates have increased dramatically, while the much-vaunted business rate relief has been miniscule. Moreover, the self-employed have been asked to contribute far more to the state coffers without any increase in protections or rights. Both measures are set to stifle the small, innovative businesses which drive our economy and keep our communities vibrant.

Next year, the self-employed people’s contributions to national insurance will increase from nine per cent of their earnings to 10 per cent to rise to 11 per cent in 2019. With this increase, however, come no extra guarantees, security or protections for the self-employed. No holiday, no sick pay. The self-employed and small businesses generally have little to no protection against serious issues such as late-paid invoices or the looming insecurity of Brexit. Yet the government, without doing anything to mitigate this precarious situation, wants to squeeze them further.

Business rates as well are set to rise dramatically, despite repeated warnings of the catastrophic effect this will have on small businesses, potentially putting many out of business. The government claims to be offering expanded business relief to counter balance this, yet the relief to be provided is so miniscule as to be meaningless in the face of this rate hike. The government says that it will raise more revenue by doing this but ultimately it could well prove to be counter-productive. By wiping out small businesses, the government will be robbing itself of this source of revenue. Frankly, the logic of this action at its very base is flawed – why go to the trouble of creating a relief from business rates, making more of the red tape the Tories hate so much, when you are going to raise rates way beyond the level of relief anyway? The irrationality of it all is mind boggling.

The only ones to benefit from all these changes are the faceless, large companies slowly eradicating our high streets. In particular, online companies, such as Amazon, will benefit from this as they do not have shop fronts and so will not be paying these hikes. These changes are a further step towards a Britain where high streets, instead of vibrant community hubs, will simply have sporadic delivery company outlets serving giant online stores, in between boarded-up shop fronts. We are already far more isolated from our neighbours and our communities than ever before. Post-credit crunch Britain, ravaged by years of neoliberal failures does not need any more assaults on the cohesion of its communities.

This national insurance contribution increase, a breach of the Tories’ election manifesto, should put to bed once and for all the confusing idea that the Conservative party is somehow a friend to small business. Even Tory backbenchers reportedly complained about the increases, seen as an attack on the ‘white van man’, in the way it punishes the self-employed and entrepreneurs, alongside a potential rise in registration fees for new diesel vehicles. Now is the time for the Labour party to make it patently clear that it is and long has been this country’s true friend to small businesses that underpin communities. While this might not be on the same scale as the shambles that was George Osborne’s 2012 budget catastrophe, Philip Hammond’s contribution is certainly a sterling effort in that direction.

Ibrahim Dogus is chair of SME4Labour. He tweets at @ibrahim_Dogus