Labour's plans to cut business rates deserve credit

posted on 25/09/2013 08:37:56 by Jonathan Elliott

The signs from the Labour Party Conference in Brighton look good for Britain's SMEs.

Cutting business rates could deliver vital savings for SMEs

Labour leader Ed Miliband used a key section of his speech at the party's conference in Brighton to address the UK's small business owners, with energy prices and business rates high on the agenda. Let's look at the latter for now.

The former Energy and Climate Change Secretary pledged to reverse the coalition's plans to increase business rates for smaller firms - the equivalent of an £800m tax break. This would be financed by scrapping a scheduled cut to the corporate tax rate, and is expected to save SMEs an average of £450.

Mr Miliband's proposal meant the message for small businesses was clear - they form a vital part of Labour's One Nation vision, and big businesses will have to play second fiddle.

The party of small business

The move has been criticised in some circles for having the potential to deter market giants from investing in the UK, but with SMEs essential to economic growth it's vital that we find fresh ways to support them - even if it does ruffle the feathers of global organisations.

Indeed, with the coalition accused of being too lenient on industry leaders as international firms allegedly dodge multi-million pound tax bills, Mr Miliband's words will have struck a chord with smaller firms that have consistently seen their profit margins eroded by expensive overheads.

With small businesses being so key to the economy, it's essential we continue to support their efforts and don't leave them exposed to unfair costs that can threaten their existence

While the average £450 saving that business rate cuts will bring for SMEs could be deemed a drop in the ocean, it's a vital saving that can boost their bottom line and improve their ability to compete.


Bemoaning business rates

It's no secret that small firms face difficulties when it comes to business rates - unfairness clearly exists, and the bills are crippling.

Make It Cheaper research recently found that 15% of SME owners consider business rates to be the most unfairly-priced of all the costs they have to pay, while a report in the Sunday Times revealed how a Hereford shop owner was having his store taxed at the same rate as he would if the business was operating on Kensington High Street. A market town on the Welsh border is a long way from the cosmopolitan bustle of west London.

Tread with caution?

Despite the positive impact that cutting business rates will undoubtedly have, some experts have urged Labour to tread with caution when trying to scrap planned cuts to corporate tax.

John Cridland, the director general of The Confederation of British Industry, says that one of the coalition's biggest achievements has been to lower these tariffs and attract further investment in the UK. Abolishing proposals to introduce further cuts could prove costly, he says.

Yet his view places a disproportionate emphasis on the contribution that major businesses make to our economy - and underestimates the vital role that smaller firms play in the UK.

The strength of SMEs

Figures released by the Department for Business Innovation and Skills at the end of last year showed there were an estimated 4.8 million SMEs operating in Britain. These companies employed some 23.9 million people and had a collective turnover of £3,100 billion, accounting for 59% of all private sector employment and 48.8% of private sector revenue.

With small businesses being so key to the economy, it's essential we continue to support their efforts and don't leave them exposed to unfair costs that can threaten their existence.

Ed Miliband may have been wide of the mark with his energy price freeze, but the stance on business rates is one I'm happy to support.

Image credit: Images Money

Jonathan Elliott

Jonathan Elliott is Make It Cheaper's CEO and founder. He recognises that small businesses are the lifeblood of the British economy, and is passionate about making it easy for them to save time and money, boost their profits and improve prospects for growth. As a vocal campaigner for fair treatment of SMEs by utility companies, Jonathan collected ‘SME Consumer Champion’ & ‘Most Trusted’ at the 2013 Energy Live Consultancy Awards.

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