Talking a good game

As the parties court small businesses' vote, the Tories made a good start by talking to them

Last week I attended an event hosted by the Conservative Party. I had been pleasantly surprised to receive the invitation to join leading entrepreneurs, fellow journalists and lobby groups for a chance to tell the shadow government how we feel small businesses could be better supported. A political party asking entrepreneurs how they can better shape their policy, can it really be?

Lack of consultation with businesses has been a sore point (CGT, anyone?) so the Tories were off to a good start. The current government has dropped a number of unpopular bombshells on entrepreneurs, not least upping the small firms’ corporate tax rate from 19% to 22% over three years and of course the controversial abolition of taper relief. The Tories certainly have some ammunition with which to attack Labour’s enterprise policy shortfalls. But will they really do any better?

On the day, and since, both parties have been revealing their ideas on helping individuals and businesses through the recession. We suspect that the timing of the opposition’s reach-out to entrepreneurs was not coincidental, being two weeks before the government’s Pre-Budget Report.

But some of their ideas were extremely encouraging. For example, they have firmly promised to reverse the hike in the small firms’ corporate tax rate, bringing it down to 20% while lowering the headline rate to 25%.

The Tories also revealed a number of other measures to help small firms improve their cash flow, including a cut in National Insurance for the smallest employer by 1%, which would save about £100 every month, the option to defer VAT payments and a NI tax break worth up to £2,500 for employers hiring people who have been on benefits for more than three months, to stem the haemorrhage of jobs from the labour market. According to shadow enterprise minister Mark Prisk, a similar scheme in the States directly resulted in the creation of one in every three new jobs. This would be self-funded by the money saved on benefits. “We think government should be paying people to be in work, not to be unemployed,” he said.

Meanwhile Brown, possibly part of some kind of wager to see how many times he can say ‘fiscal stimulus’ this month, has accused the Tories of proposing ‘unfunded’ tax breaks that would fail to achieve this. Instead, he says the answer lies in borrowing more money to fund short-term tax cuts to get the economy moving again – the details of which we eagerly await in Darling’s Pre-Budget Report.

But, while the parties have been battling it out and grabbing headlines, what both sides have been noticeably quiet on is how they will improve access to finance for businesses. This was a recurring concern at the event, especially as it’s nigh-on impossible for businesses to borrow when they have no assets on which to guarantee it. While the credit crunch has worsened this, the government’s Small Firms’ Loan Guarantee Scheme has long been derided and neither side has revealed plans to replace it.

“There’s no doubt that we do need to improve and reform the way in which growing businesses are financed,” Prisk told me after the event. While he vowed to review the scheme, he added that he’s heard contradictory evidence from businesses saying they like it. (He must have been lucky enough to meet one of the three entrepreneurs able to draw on it over the past couple of years, I suppose.)

To be fair though, he also told me he was struck by the strong sentiment regarding the way in which some banks are treating small and medium-sized businesses that came through in the discussion. “I want to press very firmly both on ministers, and frankly also the senior management of these banks, that it is not acceptable for them to abuse their role with good businesses,” he said.

So plaudits to the Tories for asking for businesses’ views. I’ve been assured that the outcomes of the discussion will go directly towards shaping their policy. “This is an ongoing dialogue because unless we know what’s happening out in the real world, the danger is that at Westminster we just won’t be in touch,” added Prisk, who also made the good point that we need to establish a regime that businesses can trust.

Let’s hope the government has woken up to this fact too. So much in politics is about knowing the right things to say – but now it’s really time for action. So now all eyes turn to those who are in a position to take it, and especially Alistair Darling and next week’s Pre-Budget Report. Let’s hope also that the government has learned its lesson about tax bombshells and will give entrepreneurs something to smile about, at last. They talk about entrepreneurs changing the world – so let them.


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