Sunak vs. Truss: who is best for small businesses? As the Tory leadership race reaches its final round, we compare policies to see who is the better choice for small business owners. Written by Helena Young Updated on 5 September 2022 Our experts We are a team of writers, experimenters and researchers providing you with the best advice with zero bias or partiality. Written and reviewed by: Helena Young Lead Writer It was only eight weeks ago that Boris Johnson was standing outside 10 Downing Street, announcing his resignation with an emotional and patriotic goodbye: “them’s the breaks”.Since then – while SMEs contend with one of the worst economic crises of their lifetime – the government has been searching for its new leader. There’s been thousands of televised debates, hundreds of headlines, and ten dropouts so far in the Tory leadership election.Now, just two contenders remain to ferry the UK through an impending recession. On 5 September, either Rishi Sunak or Liz Truss will take up the post of prime minister, making them the fourth to do so in less than ten years.Below, we’ve analysed each candidate’s proposed policies, voting histories, and previous stances to see which will be the better choice for small businesses come September. This article will cover: Sunak vs. Truss: tax and spending Sunak vs. Truss: cost of living crisis Sunak vs. Truss: Brexit Sunak vs. Truss: sustainability Sunak vs. Truss: innovation Who do small businesses want as the new prime minister? Sunak vs. Truss: tax and spendingPerhaps the most pressing issue facing today’s small businesses is the rapid rise in inflation, which is currently threatening profit margins and sending overheads surging.New tax pressures, such as an increase in National Insurance, have also added to SME budgeting woes. So how does each candidate fare when it comes to tax and spending?As chancellor, Rishi Sunak oversaw the country’s finances throughout the pandemic. He was behind many COVID-19 support loans – several of which were praised. However, Sunak has also faced criticism for “ignoring” SMEs in the spring budget.Should he be elected, Sunak has been careful to promise any big help measures. He says he plans to reduce taxes only “once we’ve gripped inflation”.Truss has been much bolder with her outlined policies, with planned cuts to national insurance, corporation tax, and VAT. She says she will pay for these by spreading the UK's debt from COVID-19 over a longer period.SunakTrussNational InsuranceAs chancellor, raised National Insurance by 1.25 percentage points. Also raised the earnings level at which National Insurance starts to be paid to £12,570Has vowed to reverse the rise in National Insurance in September, by using an emergency budgetCorporation TaxHas announced plans to increase corporation tax from 19% to 25% in April 2023Pledges to scrap Sunak’s planned rise in corporation tax VATMade a U-turn earlier this year to pledge scrapping 5% VAT rate on household energy for one year Has floated a plan to slash current 20% VAT rate to 5% Income TaxPledges to cut basic rate of income tax by 1p in April 2024 and a further 3p by the end of the next ParliamentIs “considering” raising personal allowance (the tax-free level above which people begin paying income tax)Commenting on the two candidates’ attitudes to corporation tax, Lee Murphy, founder of The Accountancy Partnership, says: “Although tax cuts seem supportive for small businesses at first glance, reversing the corporation tax hike only really benefits high-profit businesses and increases competition as taxes don’t reflect the disparities in earnings.“As well as failing to uplift small businesses, this level playing field would cost the economy around £11.9 billion in its first year and that money arguably needs to be recouped elsewhere.”VerdictTruss has gone all-in on financial policy with big announcements around tax cuts and budgeting. Her bold suggestion to cut VAT by a huge 15% would do a lot to help businesses fight rising prices.But as Murphy points out, some of these policies will actually have a negative effect on small businesses, such as scrapping the planned rise in corporation tax.Sunak’s policies look more realistic as a result – although many critics say they won’t be enough to deal with the hike in energy costs. Sunak vs. Truss: cost of living crisisMany business owners are under threat from the cost of living crisis, with consumers cutting back on spending and rising energy bills threatening employee satisfaction.As a result, the topic has been high on both Sunak’s and Truss’ agendas – although there’s been few decisive statements made.In the past, Truss has voiced her opposition to “handouts”. That said, a source on her campaign said she was keeping open the possibility of extra payments for all this winter.Sunak has argued that doing so will only exacerbate an already-high inflation rate. However, he has shown he is not above making a U-turn after changing his mind on VAT cuts last month.Sunak TrussInterest ratesHas said that the government needs to “let the Bank of England get on with its job with interest rates”Has said that the Bank of England needs to do more to tackle inflation, and that the government should be tougher on monetary supplyEnergy bill supportAs chancellor announced a £400 grant for household energy bills in addition to £150 council tax rebate previously announcedSays she will tackle the crisis by putting money back into people’s pockets, such as by reversing the National Insurance riseVerdictNeither candidate wants to say anything too firm on the cost-of-living crisis. Instead, support will likely come into effect in October, alongside the new energy price cap.Sunak wants lower interest rates, which will encourage more businesses to invest in expansion, but might worsen the rate of inflation. Truss, meanwhile, wants higher interest rates which will discourage consumer spending and help to bring the rate of inflation down. Sunak vs. Truss: BrexitIn terms of Brexit policies, both candidates are focused on passing the Northern Ireland Protocol Bill. First introduced by Truss as foreign secretary, she claims it is one of her major achievements in government.The bill gives the UK government power to rewrite large aspects of the original Brexit agreement to minimise controls on British goods entering Northern Ireland.For Northern Ireland traders, it will have a big impact. They had to spend much of 2021 learning the complicated post-Brexit processes of importing and exporting goods, as well as educating Great Britain (and EU) suppliers and customers.Naturally, the move has angered the EU, which sees the bill as a breach of international law, ensuring a continued blight on already sour EU-UK relations.SunakTrussNI Protocol BillPromises to "fix" the NI Protocol - part of the UK's post-Brexit deal with the EU Also promises to fix the Northern Ireland Protocol Bill, which she was responsible for as foreign secretaryUK-EU relationsPromises to scrap or replace EU laws deemed to hold back the economy VerdictNeither candidate has given a convincing answer to how they see the NI protocol issue being resolved. Truss’s hard-line Brexit stance has won over more Tory hearts than Sunak, who is viewed as being more pro-EU. Sunak vs. Truss: sustainabilityThe UK has pledged to become net zero by 2050. Much of the responsibility for meeting this target has so-far been placed on the country’s 5.6 million small businesses, which have been asked to ‘lead the charge’ and halve their carbon emissions by 2030.Implementing more eco-friendly practices will therefore be a shared goal for UK firms over the next three decades. With energy bills hitting astronomical heights, it will also be necessary to protect SMEs as the country diverts away from imported fossil fuels.So far, neither candidate has paid much attention to the climate crisis in policymaking. Sunak has been all but silent on the issue, while Truss has largely downvoted measures to prevent climate change.SunakTrussNet ZeroClaims to be committed to the UK’s net zero target of 2050Claims to be committed to the UK’s net zero target of 2050Fossil FuelsHas suggested he will ban onshore wind farms and invest in offshorePlans to authorise more oil and gas drilling licences in the North Sea to help with gas and electricity supplyGreen LevyWants to suspend the Climate Change Levy (which pays for green projects) for businesses in the industrial, commercial, agricultural, and public services sectorsVerdictIf we are to grasp at a silver lining here, Truss’s policy of cutting the CCL might free up money for small businesses in eco-unfriendly sectors to purchase green technologies. Ultimately, however, neither candidate impresses with their sustainable policies. Sunak vs. Truss: innovationPrime minister Boris Johnson’s government, which included Sunak and Truss, was elected with a massive majority in 2019 on an agenda that promised to make the UK a “scientific superpower” and double public R&D spending.Still, given the business world’s current focus on surviving the upcoming recession, it’s understandable that neither Sunak and Truss have given much attention to the issue of growth and investment.SunakTrussInnovationWants to replace existing data protection rules (GDPR) to help UK technology firms innovate Wants to create new “low-tax and low-regulation zones” across the country to create hubs for innovation and enterpriseVerdictNot too much to shout about here but it’s Truss who seems to be doing the heavy lifting, with a perhaps overly-bold promise to foster more R&D in the UK through new ‘low-tax’ zones – potentially also supporting the government’s levelling up agenda. Who do small businesses want as the new prime minister?In short, deciding between Sunak and Truss can be summed up as choosing lower taxes or lower interest rates. Both contenders are focused on improving the UK economy; it’s their chosen methods that differ.Next Monday, we’ll see who will get to enact their respective recovery plan. But before then, who are small businesses hoping to see put in power?“Rishi knows best”Polls show that Truss is currently the more popular option for Tory party members. But amongst SME owners, Sunak still has some favour.For Firdaus Nagree, founder or furniture showroom, FCI London, the choice isn’t easy. He tells Startups that “[while] neither of the options are particularly ideal, Sunak does seem to be the better choice.”Experience seems to be the main pull factor behind Nagree’s vote for the ex-chancellor. “Sunak understands the levers available far better than Truss because he has been working on them for the last few years,” reasons Nagree. “He also has the advantage of having been at the top table during a time of extreme crisis.”Ishveen Jolly is founder and CEO of OpenSponsorship, an online marketplace for sports sponsorships. Jolly’s choice would also be Rishi Sunak – but for what she describes as a more “personal” reason.“To see a PM from an ethnic minority background is a big deal,” she says. “It sends a message that this country is inclusive, and that is something I feel is very important for the business community and society as a whole.”“In Liz we Truss-t”On the opposing side is Michael Buckworth, the managing partner of law firm, Buckworths. As a member of the Tory party, he has already voted for Truss, explaining that “significant tax rises are simply untenable at the moment. Promises of tax cuts in 7 years don't help people today and Sunak seems really out of touch with the cost-of-living crisis.“Truss hasn't been able to persuade me yet that her [planned tax cuts] won't add to already sky-high inflation. But I do believe that tax cuts are needed and should lead to growth.”Who do you want to see replace Boris Johnson as prime minister next Monday? Let us know by emailing firstname.lastname@example.org. Share this post facebook twitter linkedin Tags News and Features Written by: Helena Young Lead Writer Helena is Lead Writer at Startups. As resident people and premises expert, she's an authority on topics such as business energy, office and coworking spaces, and project management software. With a background in PR and marketing, Helena also manages the Startups 100 Index and is passionate about giving early-stage startups a platform to boost their brands. From interviewing Wetherspoon's boss Tim Martin to spotting data-led working from home trends, her insight has been featured by major trade publications including the ICAEW, and news outlets like the BBC, ITV News, Daily Express, and HuffPost UK.