David Fuller's view -
Let’s stop pretending that the storm over Philip Hammond’s Budget and the self-employed is all about white van men. Not that I have anything against white van men. We have a clutch of faithful local tradesmen who have come out to rescue our household from disasters so often that they are now cherished family friends. Indeed, our actual extended family includes a cohort of white van men.
But the issue at hand is about a huge range of vocations and occupations which do not involve spanners. As well as all the self-employed creative types I listed on this page last week — writers, artists, actors and musicians — there are the IT consultants, the web designers and the digital start-ups leading the technological revolution.
And then there are the artisan bakers, the small farms reviving traditional British cheeses, and the mothers who create kitchen table businesses so they can work from home instead of being economically idle: all those innovative ventures which have introduced such vitality into the work culture. These are the people the Chancellor has chosen to clobber.
The Chancellor has attacked enterprise
Let’s not pretend either that this is only about putting up National Insurance contributions. That is only one front in what is clearly an organised campaign against the self-employed and small business owners who are among the most productive, self-reliant and progressive in the true sense of the word (meaning “encouraging progress”) participants in the workforce.
There is a pattern here which it is now impossible to miss. The two measures I wrote about last week — the introduction of quarterly tax returns and the effective abolition of the flat-rate Vat system — are going to be devastating. The first of these is deranging and apparently pointless: in future, all self-employed individuals and small businesses will be required to file four income tax returns per year instead of one. These will have to be done digitally using specially designated software. This will, of course, quadruple their accountancy charges at a stroke and require access to online facilities.
Even more damagingly, this change will oblige them to pay income tax at the end of each quarter rather than, as now, in one or two yearly instalments.
So if your business is seasonally affected: if you have a healthy quarter (say, in the run-up to Christmas if you produce gifts, or the summer if you are a gardener), you will not be able to spread the cash flow from that good period to cover the fallow one that follows. It will not be possible any longer to even out your good and bad times over the course of the year.
Of course, your next quarterly return will reflect the loss of business and your tax payment will be adjusted but that will take three months or more to come through. By that time, as almost anyone who runs on a tight margin will know, you could either have gone broke or found it necessary to borrow more to remain afloat.
Although I watched Philip Hammond’s budget delivery on Wednesday the 8th, while multi-tasking in the home gym, I confess to not fully understanding the tax hikes at the time. Apparently, Ben Wright, Group Business Editor at The Telegraph was in a similar position, as I posted his article: With little room to manoeuvre, Philip Hammond delivers a stead-as-she-goes Budget, a few hours later. However, Janet Daley’s Sunday column above is much more detailed and captures the outrage expressed by many Conservative Party voters.
I am now trusting that this reaction will represent a warning shot across the bows for both Chancellor Hammond and Prime Minister May, as they declare Article 50 and commence Brexit negotiations in earnest next month.
The Conservative Government does not need to move further to the Left. Instead, it needs to both encourage and incentivise taxpayers in the UK, while also attracting businesses from Europe, the USA and other prosperous regions of the globe, because (hopefully) the UK will be providing both stability and opportunities in a competitive environment.
It would be a mistake, I believe, for the Government to assume that it has to pay back Gordon Brown’s reckless spending deficit, before it can once again act like a Conservative administration. Instead, it needs to encourage strong economic growth, which it will be in a position to do now that the global economy is improving and the UK is leaving the EU. A strong economy will reduce the deficit while also improving the UK’s standard of living over the longer term.
A PDF of Janet Daley’s column is posted in the Subscriber’s Area.
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