After the UK party conferences this month, we report on the government’s mini-budget and subsequent U-turn on the 45p tax rate, the latest business support announcements and the new political landscape. We also discuss the important topic of social value: Why it is good for your company and how you can report the social value you are already creating in your community as a small business.
Guests:
Craig Beaumont, Chief of External Affairs, FSB
Arnab Dutt, Chair of Social Value Policy, FSB
After the UK party conferences this month, we report on the government’s mini-budget and subsequent U-turn on the 45p tax rate, the latest business support announcements and the new political landscape. We also discuss the important topic of social value: Why it is good for your company and how you can report the social value you are already creating in your community as a small business.
Guests:
Craig Beaumont, Chief of External Affairs, FSB
Arnab Dutt, Chair of Social Value Policy, FSB
Welcome to this latest FSB monthly roundup podcast brought to you by the Federation of Small Businesses, and the go-to podcast for news, tips and important information for small businesses and the self employed. This is our October small business round-up, in which we will take a look at some of the important issues hitting the headlines at the moment, and which you need to be aware of right now as small business owners. This month it is impossible not to talk about politics, following the government's mini budget and subsequent U-turn on the 45p tax rate, plus business support announcements and the party conference season, FSB's Chief of External Affairs, Craig Beaumont is here to talk all things many budget, upcoming political headwinds and the new political landscape. And I'm pleased to say that this month, I'm also joined by Arnab Dutt, FSB Policy Champion, who will discuss another important hot topic for small businesses right now. And that is social value, and why it's good for your small business, Craig and Arnab, thank you for joining us. Craig, let's start with the current political landscape. We've got a new Prime Minister, new policy announcements relevant to small business, party conference season, and from there, it looks like new competition between the two biggest parties at Westminster for the small business vote come the next election. This all comes, of course, against the backdrop of a cost-of-doing-business crisis in UK, including energy bills, inflation, high tax burdens, so let's unpack some, if not all of that in terms of what it means for for small businesses and the self employed. Lots of political heat over the last couple of weeks, but focusing on this from a small business lens, what do you think are the most positive announcements that we've heard?
Craig Beaumont:Thanks, yes it's certainly never dull in British politics. And we've just got back from party conference season. And the first thing we're doing is this podcast about how it's all gone. So I think, you know, for FSB, and for small businesses, there were two primary announcements, which are really, really important, we lobbied really hard to get them. It's just a shame that these were wrapped within what became arguably one of the most unpopular budgets in recent times. So the first of those is a small business energy package, which will see wholesale unit price of energy capped for fixed contracts. And if you're on a variable contract, there'll be a sort of a capped maximum discount. And there'll be an equivalent if you're on something else, like a heating oil contract if you're not on electricity or gas. So this is really good. It's very complicated. Small business contracts are really complex and much more diverse than, you know, you or I as consumers have. And consumers already have a cap in place for standing charges and for unit prices. So effectively for small business, this isn't equivalent, but that cap on the consumers took a year or so to get everything ready and legislate for. So what government's now trying to do, is do that work in a few weeks for small businesses. That means it's, you know, running by the seat of the pants half the time. Now, when it's brought in, it should also, as well as help with energy bills for all small businesses with premises that therefore use energy, it should also reduce inflation by up to five percentage points. We've discussed inflation before on this podcast about, you know how it really hits small business. So that's a major, major thing. The second major win was about reversing the National Insurance increases, you know, FSB was created in response to an unfair NICs hike, and we've just had another one. So getting rid of this is really, really big for us both in terms of money, but also actually in terms of our heritage and where we're from. So basically, anyone with a NICs bill will see a reduction now in just under 10% of their bill – 1.25 percentage points. And there's four National Insurance Bills, there's employer NICs that employers pay on top of every job, known as the Jobs Tax. One thing that we've campaigned hard against. The other is employee and self employed NICs, which you own yourself. And then finally, there's a dividend equivalent NICs, that many of our members who are limited company directors pay. Now all four of those are going to be reversed. And at the same time, and I remember when they brought in the hike, we managed to get an increase in the employment allowance and expanding it to£5,000. This was our original idea, which takes off five grand off every single next bill, and that's going to stay at that higher level. So taken together, those two things really huge, about 70 billion pounds, we think depending on what happens with energy prices, a big deal and all based on small biz cash flow, and all happening relatively soon. There were a series of smaller measures, which I'm not going to go into now, but things like cancelling the corporation tax rise, which will affect just under half of our members, defanging Enviro 35 which will help the self-employed and things around investment, proper allowances put in permanently, and the help on alcohol duty, and finally the return of tax free shopping, which the lots of our members in tourism will be pleased to see around tourism centres across the UK.
Jon Watkins:Yeah, some really good announcements there. But even with these measures, how tough do you think the coming months are going to be for, for small firms? And what what more would you like to be seen done by by government?
Craig Beaumont:I mean, it's going to be a absolutely a tough winter. I think the priority of government should be to get the legislation on these two big things that we like, get that legislation passed, because they can't just decide it, they need to pass a bill through the House of Commons and the House of Lords. So Parliament's not even sitting now, they will come back on the 11th of October. And then for that month, they've got a few weeks to pass all stages and legislation that does this. So we need the government to really push it through fast, where the opposition, which is now the Labour Party has now backed both these packages now. So hopefully, that means the two big parties together, when they tend to agree they can pass things fast, great. If there's no hold up, it means that businesses will get that money in November. And that's really important, I think, because bills are already rising anyway. But use now really starts to rise as well. So your October use should be discounted, your energy in November, and your payroll and all those differences on National Insurance will come through in November, too. And I think, you know, in terms of other things, what else the government could be doing, well, the one that kind of glaring omission, I think in all the reforms was about business rates, where government we know is minded to look again, at this, there was a pledge in the manifesto in 2019, to reduce business rates, and that hasn't happened. But we didn't expect it at this mini-budget, because they'd only been in power for two weeks. And this is really complicated. So we'd rather they focused on the energy package, just like a small business owner working out what your priorities on that day. But they really need to turn to business rates, I think, later on through the autumn and into the winter. And then finally, there's interest rates coming which small businesses will keep an eye on for lots of reasons. They're mired in debt after COVID. And lots of debt will move now. So civil loans for example, are flexible, commercial debt, maybe even before COVID, home mortgages, any mortgage on commercial premises; all of these will likely to have more expensive repayments as and when interest rates rise, and we're expecting them to rise in early November. And we don't oppose interest rate rises, because they control inflation, which we really don't like. But they're not without pain, and everyone needs to plan for that.
Jon Watkins:Yeah, just on that energy announcement, you're hopeful that small businesses will see the impact pretty quickly, are you?
Craig Beaumont:Yes, because as long as it hits in time, to cover October energy use for November bills, and also the payroll changes on National Insurance for us all will hit in November as well, that's really a lifeline. That's a lot of cash. That will be very, very useful right now, in fact, it's not just useful, it's vital. I think, going forward, there's a couple of areas the government could focus more on. One is, well, there's energy prices, when they started to rise, it was back in February time of this year, the help only is backdated to contracts that started in April. And we think that's pretty unfair, because the help itself is only from this October to next April. So there's no real logic to an early cutoff. It doesn't matter when you did your contract. So we're lobbying to kind of see if we can change that for the businesses have got in contact with us million perhaps listening, who had their contract before April. And the second thing is, next April, we're going to hit another cliff edge. So while consumers have a full two years of support, the business package will be reviewed after three months, which will be January, and then we're into February, and then it'll decide what to do after April. The concern is that the government's instinct is to consider which vulnerable businesses might need help. And it'll do it by industry or sector. And that never really works in public policy for us. We think it should be done by size, every small business electricity bill will be affected, and therefore that would be the best proxy. So I suppose those are the two final bits that we'll be pushing on, on energy to, to make sure help really gets to everyone.
Jon Watkins:Yeah, brilliant. And, you know, I guess the next General Election is at most two years away. How important do think the small business vote will be in in the way the main Westminster parties approach that election when it comes?
Craig Beaumont:Well, that's a brilliant question. I mean, the very latest election can be is actually 2025 - the 11th of January 2025. The idea of a General Election over Christmas and a campaign over Christmas probably feels most of us with dread. But you know, what we're likely to see is one perhaps in autumn 2024 And probably the earliest May 2024. So I mean, FSB, you've heard it on this podcast we're a formidable campaigning organisation. And I think we love nothing better than a General Election, you know, we can create great policy ideas from all the reports and the authors of each report that you've had on the podcast to build into our manifesto. And that will influence what each party then does from 2025-2030. But we have 5.5 million votes. So we are really strong and they don't vote on mass, they don't vote for one party, they vote for all of them, but they will listen, and they will decide who looks the best. And, you know, it's not all about what can I get money in cash flow, it's actually about which party most aligns with my thinking and what I want for my business. So you know, a good example here is, you know, the current government's just announced it will no longer have a dedicated Small Business minister, it's now reduced to one area of 16 within a junior minister's role. Now, it's just branding and symbolic. But we've gone from a small business minister called Anna Soubry, who used to be in Cabinet, gone to down to mid-level minister now junior now one small element. So if there were other parties that stood forward and said, you know, what, we're going to bring back a small business minister, and we're going to put them in the cabinet, then that would be quite motivational. So, you know, the key for me is going to be what the next election will be like in terms of the approach, and I think it's unlikely to see, you know, a majority of 80 plus, for an existing Conservative Party, it's really hard to see a path to that, it's going to be much closer, and that a close election and a close House of Commons that then results. That's good for FSB, because our influence grows, were very, very strong when there's a small majority. So you know, we're quite excited about this. And we
Jon Watkins:Yes thanks, Craig. And thanks for from picking what are ready for it. has been a pretty complex and fluid area of of discussion in the last few weeks. Thank you. Arnab, I'll bring you in if you don't mind, you're here to talk to us about social value, and why it's good for small businesses, welcome. I guess a sensible place to start with this and a question for many of our audiences is what do we mean by social value in this context? What is it and and what does it mean in a small business sense?
Arnab Dutt:Thanks. Thank you, Jon. It's great to be here. I think social value has had a lot of meanings. But so I'll give you my personal view of what social value is about. It's about making a difference changing people's lives for the better. It's something that small businesses do especially well, and have always done really well. I think the fact is that small businesses are inherently social value organisations, because they add huge benefits into local communities. They provide employment, community spaces, apprenticeships, flexible working, they contribute to their local communities, in voluntary groups and charities. They employ people over 50. And they work especially hard with people from labour market disadvantaged groups. In all, SMEs do social value because they're at the heart of their communities. But the challenge we face is many of them don't know how to articulate and report how much value they actually add. So the Social Value Act can be seen as an opportunity to do just that.
Jon Watkins:Yeah. And we talked a bit about what it is. Why is it so important right now? And why are you raising this at this moment?
Arnab Dutt:Thanks, Jon. That's a great question. It's really important now, because it's an integral part of government policy. It's being deployed through the vehicle of public sector procurement, because it changes how we do business. And it's very much part of what was the levelling up agenda. So government and local government spend hundreds of billions of pounds on buying goods and services, and social value is a new way of buying goods and services. So the cheapest price is no longer the only factor, but how the contract is awarded, and how that contract is fulfilled. And how it delivers. Benefits of the wider community have now become incredibly important. And because of what small businesses already do, it becomes an opportunity, a way of demonstrating what they do, and winning business. And to a greater extent, a lot of work has already been done by local government who have been using social value procurement. And because of that, we've got some really great examples of small businesses doing great work in their communities, demonstrating it and winning fabulous contracts on public sector supply chains.
Jon Watkins:Brilliant. So in short here, there's a you know, if this has been considered in procurement contracts, increasingly, it's good news for small business because they're doing a lot of this stuff already. Is that right?
Arnab Dutt:It is. And of course, the challenge, as I said before, is how we articulate it. But there's been some really good work of how we did that, there are processes coming up that we're examining. And the work that I'm doing on the Social Value Task Force is looking at methodologies and really simple ways that SMEs can report. And the fact is, though if you're not doing it in the future, there's whole swathes of new business, you won't be able to win. And it's important to SMEs because public sector procurement, and procurement to do with tier ones that are on those public sector contracts are steady business, you generally get paid on time, as long as as long as the government keeps supporting prompt payment. And it adds to a level of certainty, especially if you're winning multi-year contracts for supplying goods and services. So that part of your business, if you're not actually dealing with government and the public sector, it's a great thing, it's a great thing to get into. But if you are going to approach that and engage with it, you really will have to engage with what's happening around social value. So it's really important.
Jon Watkins:That's really good. And is there somewhere people can find out more?
Arnab Dutt:Yes, indeed, FSB have a wonderful report you can access called Small Business Big Heart. And it really demonstrates how SMEs have been on the frontline in delivering social and community value that we probably didn't deliver, or appreciate, before the pandemic. And that figure for SMEs and what they do, came about from actually interviewing 8,000 respondents across the country. So it's a great report, and it's really worth looking at. And it gives you an idea of just how much impact and social value our members and small businesses produce for the UK.
Jon Watkins:And presumably, our members can go to fsb.org.uk to search for the report Small Business Big Heart and download it from there. Craig and Arnab, thank you so much for taking us through the key small business announcements in the headlines right now and the hot topics for small businesses and the self employed in our monthly small business round up. That was really good. Thank you also to our audience for listening to this episode. While I have your attention, as always, I would just like to remind you that you can subscribe to the FSB podcast series to receive regular updates and guidance on the big issues affecting small businesses and do please also remember that you can find a whole host of additional webinars, podcasts and other useful content on the First Voice website at firstvoice.org.uk and the FSB website at fsb.org.uk. Many thanks for listening.