For some small businesses the recovery stage of the Covid crisis has slowly begun. But for others, it remains some way off.
A safe reduction in social distancing from two metres to one would make the difference between reopening and not reopening for many businesses, including restaurants and pubs. But unlocking is not enough; after losing 18 years of GDP growth in just two months, we need to jump-start the economy.
A package should include a temporary cut in VAT to boost consumption, a cut in the jobs tax that is employer NICs, and expansion of business rates relief, incentivising shoppers with lower prices. Tackling the spike in late payments from those who have accepted government support, and turning the emergency loan debt attached to small firms into a student loan-style arrangement, would complete a generous set of reforms and refloat the economy.
With the right interventions, small businesses can be the drivers of the economic recovery.
Mike Cherry National chairman, Federation of Small Businesses
Editor's reply
Dear Mike
While there’s much you propose that I support, I don’t think a temporary cut in VAT will achieve much. There’s already a lot of discounting in shops, as unsold stock is offloaded. It won’t address the supply constraints, as retailers are forced to limit the number of customers in their premises. Nor will it address real anxieties many people have about the future of their incomes, which has led to an increase in savings.
It will add to the huge hole in the nation’s finances, and a smart public knows that an expensive temporary tax cut now will have to be paid for by permanent tax rises later.
For all these reasons the Conservative opposition in 2008 took the very hard decision, politically, to vote against a temporary VAT cut. It showed we were serious about being a government. Twelve years later, I don’t think the arguments have changed.
George Osborne, Editor
