Labour believes success is something to be ashamed of
Two successive Budgets have done unspeakable damage to small and medium sized firms across the country, but the government does not seem keen to reserve the punishment for set piece fiscal events, says John O’Connell
After the relentless pre-Budget leaks was the catastrophic event itself. Then came the forensic analysis of who knew what when – and the Chancellor playing a pathetic game of cat and mouse with journalists and the public as she tried to dodge questions on what she knew when about the state of the public finances. But no chance to take a breath, I’m afraid. Businesses must now brace for the Employment Rights Bill, which is back in the Commons one major policy lighter after the government ditched rights to claim unfair dismissal from the first day of employment. Ministers clocked that the Lords were assembling to give the Bill a going over, and decided their flagship policy was a price worth paying for safer passage. Instead, a six month period will be allowed during which an employer can decide whether or not a new starter is a good fit for their business.
There is plenty left over to be concerned about. In a transparent piece of misdirection, latest updates to the Bill potentially include lifting the cap on compensation for unfair dismissal. So while the government is telling businesses they are listening to their concerns, they are potentially putting them on the hook for enormous pay outs for vexatious claims. The Growth Commission now estimates that the updated Employment Rights Bill will likely damage the economy by £38bn.
How much more are British businesses meant to take? Two successive Budgets have done unspeakable damage to small and medium sized firms across the country, but the government does not seem keen to reserve the punishment for set piece fiscal events.
Talk to someone running a small business about their current plight, and what comes up is a sense of deception. In the run up to the election, this was going to be a pro-business government. It was going to be on the side of farmers. They even pledged to scrap business rates and replace it with something better.
‘Deeply misled’
On the latter specifically, they have actually doubled down on the sleight of hand – it was revealed yesterday that pub landlords feel “deeply misled” over rates, being told that there was significant relief on the way but actually facing higher bills. The pub sector’s plight illustrates a deeper problem: a tax system so complicated that even ministers don’t understand it. When community pubs face 63 per cent increases in business rates bills, while warehouses get just seven per cent, we’re witnessing a fundamentally broken system.
This is what happens when you layer complexity upon complexity instead of addressing the fundamental issues of our tax system. But rather than reform, we got more tinkering, exemptions and incomprehensible reliefs no one can calculate or predict.
The answer is radical simplification. Local authorities should control business rates directly, competing for investment rather than simply extracting revenue. When councils depend on business success rather than Whitehall grants, incentives align properly. They start working for growth instead of against it.
British entrepreneurs aren’t the villains here, they’re the heroes. The heroes this government doesn’t deserve
This creates the dynamic effects that politicians claim to want but consistently undermine. Lower, predictable rates encourage investment. Local competition drives efficiency. Simple systems reduce compliance costs and eliminate the scope for “misleading” entire industries.
But what’s most troubling is the government’s underlying attitude towards business itself. British entrepreneurs aren’t the villains here, they’re the heroes. The heroes this government doesn’t deserve. They create jobs, drive innovation, take risks with their own capital, and generate wealth that ultimately funds public services. Yet this government treats them with deep suspicion and outright hostility, as if success were something shameful rather than something to celebrate. Until that changes, we’ll keep closing pubs and punishing businesses instead of creating the growth that we need.
John O’Connell is chief executive of the Taxpayers’ Alliance