9 March 2023

How Hunt can give family firms a boost on Budget day


It’s impossible to overstate the importance of family firms to the British economy.

Family-owned and or run businesses constitute 85% of U.K. business and employ 55% of our workforce. They are not only the backbone of the economy but also are the risk-takers, entrepreneurs and innovators from whom economic growth and progress springs.

But too often, these people are ignored by policymakers and the Westminster Bubble more generally. Whitehall, it’s fair to say, prefers to deal with big multinationals, while there is a prevailing attitude across both the biggest parties that business is something to be regulated and controlled, not embraced and encouraged.

But embrace them we must if the UK is going to drag itself out of the economic mess we find ourselves in.

The Independent Business Network, the organisation I chair, seeks to give a voice to family businesses – from sole traders to larger firms. We have produced a pre-Budget report setting out what is needed to stimulate growth through supply-side reforms (which are still badly needed, however unfashionable the phrase might now be).

Among other things, we are demanding a reduction in Corporation Tax to incentivise investment and reward effort, and to make the UK more competitive. We’re already seeing companies depart the UK because of our unfavourable tax treatment, we cannot allow this to become a trend and investment to dry up as a result. Specifically, we think Corporation Tax should only kick in only two years after a business begins to make a profit. The Government should look at introducing a Startup Corporation Tax Rate of 5% and should apply it for five years after the first two years exemption.

We also want to see capital gains allowances maintained, including the Enterprise Investment Scheme (as mentioned by Aria Babu here). It is essential that investors are rewarded for the considerable risk they take in creating new enterprises. Instead, the Chancellor has already said he plans to squeeze capital gains relief thresholds – very much a move in the wrong direction.

Simplifying tax reliefs would be another welcome move, and would help smaller businesses including insurance premium tax, providing tax breaks for private medical costs which would relieve demand on the NHS. Another possibility is letting SMEs offset childcare and transport costs against tax. All of these fall into the ‘every little helps’ category.

Last but not least, fixing inflation is a priority for business and people alike. The primary responsibility for this lies with the Bank of England, which has failed monumentally to hit its 2% target, not least because of the pensions debacle of last autumn – which was every bit as much a regulatory failure as a political one.

Now, it’s almost certainly the case that inflation will fall naturally in 2023. However, major risks lie down the track, particularly with the cost of energy, which affects not just household bills but the cost of just about every product we consume. The Chancellor should immediately introduce measures to boost domestic production of hydrocarbons including fracking to provide a bridge for the UK journey to Net Zero. A big part of that transition must also be a major nuclear programme, with long-term patient capital. Ultimately that is the only viable, long-term green solution. The stakes couldn’t be higher: if we do not achieve low-cost energy security, our long term prosperity is in jeopardy.

It’s certainly a long shopping list of measures, but there is so much that needs fixing in our country. For far too long we’ve got used to bumping along with little to no growth, all the while public services consume ever more of our national income and demands for government largesse grow with every passing year. We simply cannot go on like this. The country urgently needs to shake itself out of torpor, embrace risk and go for growth. None of this is going to come from Whitehall and the public sector, only the private sector can deliver what we need.

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John Longworth is Chairman of the Independent Business Network.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.