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Modern life has changed the way we shop, and this has affected small businesses of Walthamstow. Greens don’t often get much attention for their plans to help small businesses, so I thought I’d outline some ways that the Green party could help, and why the idea of increasing the minimum wage need not be a problem for small businesses when applied in the context of other proposed changes.
Lift the burden of business taxes
The current system of business taxes is broken – small businesses, especially those based on our high streets, face the burden of expensive business rates which take away money they could invest to grow. Meanwhile, huge internet retailers pay proportionally lower taxes for their vast warehouses based where rates and rent are cheaper.
High Street retailers suffer most from this broken system – retail accounts for around 5% of the British economy but pay 25% of all business rates.
We will scrap business rates and replace them with a Land Value Tax – charged to landowners, not land users (including businesses renting the space). The new Tax will charge the landowner 1.4% of the total value of the land each year, meaning that as the land value increases (e.g. if new public transport connections drive rental values up, see example here). We will prevent landowners passing the full impact of this tax on through higher rents to business tenants .
The new tax system will capture the increased value that benefits not the landowner, not penalise the business tenant for simply trading in a particular location.
The end of the business rates burden will constitute a tax cut for small businesses tenants everywhere.
Increase the Employment allowance
We will increase of the Employment Allowance to £10,000 (currently just £3,000) per year. This means that small businesses will only have to start paying employer national insurance contributions once their employer national insurance contributions bill goes above £10,000.
The current £3,000 limit means that a small business could employ 1 full-time worker on the average salary and one half time worker on that salary and not have to pay national insurance contributions (once they employed a third worker, their national insurance contributions bill would go above £3,000 and they would have to pay).
Our increase to the Employment Allowance will mean that a small business could employ four full-time workers on the average salary and not have to pay national insurance contributions (once they employed a fifth full-time worker, their national insurance contributions bill would go above £10,000 and they would have to pay).
This tax cut will benefit hundreds of thousands of small businesses, allowing them to hire more people at a lower cost.
Reduce VAT for entertainment and tourism businesses
We will reduce VAT on food and drink (from 20% to 5%) served in pubs, bars and restaurants, on hotel bookings and on theatre, music concert and museum and gallery tickets. This will boost 125,000 businesses in the entertainment and tourism sectors.
This would bring the price of an average restaurant meal down from £19.20 to £16.80 and the price of an average theatre ticket down from £32.52 to £28.48.
This cut in VAT for tourism businesses follow the precedent set by other EU nations, including Ireland which introduced a 9% rate in July 2011 .
It also meets the demands of the Cut Tourism VAT campaign group.
Ensure prompt payment of invoices served on large companies
We will introduce fines for large companies that fail to pay small businesses on time. This action is urgently needed – the late payments crisis meant that last year Britain’s small businesses faced a collective shortfall of £6.7bn due to late payments of invoices.
These fines could be administered on the same model used by HMRC to fine businesses who don’t complete their tax returns on time:
- 5% of tax unpaid after 30 days
- Another 5% of tax unpaid after 6 months
- Another 5% of tax unpaid after 12 months
The Government are taking tentative steps towards this policy – through suggesting that their ‘Small Business Commissioner’ (a sort of ombudsman, but even more toothless) could explore ‘sanctions’ for the worst invoice offenders. It is isn’t enough (see analysis here), but it shows that this is an idea whose time has come.
We would also require large businesses to publish and report the difference between agreed payment days and actual payment days – allowing ‘naming and shaming’ of the worst offenders.
Provide security of income for small business people
Universal Basic Income will give every small business person an unconditional payment of £89 a week, giving them access to stability during periods of illness or periods where work is not available. This can be a particular issue for sole traders– see details here.
UBI will give all small business people a guaranteed income stream, helping them plan ahead (including scheduling holidays!).
UBI will also provide additional weekly payments for small business people, which they can choose to save. This could help address the problem small business owners, especially sole traders, under preparing for their retirement (see Citizens Advice report on this here)
Improve access to finance
We will introduce credit guidance for traditional banks, requiring them to increase their lending to small businesses.
We will also introduce a new network of regional mutual banks, which will have a core mission statement of providing fair access to finance for small business and not for profit organisations.
The model for this new form of banking will be the German public banking system. This is made up of 34 institutions owned directly or indirectly by the public sector including ownership maintained by federal, state and city government. The ownership model varies between institutions and some shares are held privately. The banks are referred to as ‘public’ because they have a duty to provide services, particularly loans, in the public interest.
Our regional mutual banks will deliver such banking in the public interest, helping small business to grow.
Improve access to Government contracts
We will grant 15% of government contracts to small and micro-businesses. We will revise the government contract application process, to remove the current barriers for entry to small business. We will encourage local authorities to adopt this model with their own contracts.
The current process still has too many barriers to entry for small businesses, leading such businesses to miss out on contacts estimated at £33.5 billion.
Provide new access to training
The National Careers Service will be hugely expanded (backed by £2 billion a year), so that offers in-person courses; giving small business employers and employees access to new skills that could help their businesses grow.
What about the living wage – won’t this cost small businesses?
We propose increasing the Living Wage to £12 per year – this will have cost implications for small businesses. However, these extra costs will be more than offset by reduced costs from the scrapping of business rates, the raising of the employment allowance and the payment of UBI to small business owners.
There is also increasing evidence that suggests that a higher living wage leads to increased worker productivity – see this 2018 Smith Institute Report.
 We will do this by supporting local authorities to extend their landlord licensing schemes, to cover both domestic and business landlords (with admin costs met by £10 billion per year local authority funding uplift).
Should a landlord attempt to pass on the cost of the LVT to current tenants, or granted to new occupiers at a higher rate as an attempt to pass on the LVT costs, this will become obvious to Local authorities through licensing records. They will then be empowered to take action against the landowner, with sanctions including fines and the withdrawal of license.