This month will see a new Prime Minister enter the doors of Number 10. The challenges they face are ones we are all aware of, and the scale is significant. Whilst much of the debate has focussed on how households are supported through the winter, it is well understood by both candidates that our SMEs are in equal need of help. And I know that this message is one which MPs from across Lancashire have been delivering, ensuring our county continues to see the growth and investment we all want to see..
The immediate danger is, of course, the cost of energy and the impact being felt by the thousands of businesses as energy prices have increased astronomically. Dealing with this, and the increasing tax burden, is the only way to limit the economic damage caused by the gas price crisis and record high inflation.
Covid delivered such a shock to the business world that without Government support many would have simply ceased to exist. The grants, business rates relief, bounce back loans and temporary cut in VAT meant that many businesses which would otherwise have failed were protected. The current crisis risks much of that being wasted money.
So with the present risk of a prolonged economic downturn there are a number of steps the new Prime Minister, whoever they are, will need to take. The first is helping businesses with energy costs. From hospitality to manufacturing there is an urgent need to limit the upwards spiral – with some businesses seeing increases of 4 or 5 times. A cap on prices for SMEs is unlikely, given the unintended consequences of the retail cap, so a tax system solution may be the best option.
That means the increase in Corporation tax must also be rethought, alongside serious reform of business rates.. When the corporation tax increase was pencilled in the economic circumstances were very different. Our nation was bouncing back strongly from Covid but as that is now at risk, we have to consider changing tack – even if that means some political pain.
The new PM must look at all aspects of regulation and red tape to consider what is essential, and what is adding unnecessary cost. Far too much regulation can be put into the ‘common sense’ bucket, but the result of having it is high compliance cost. Removing that will spur on growth and unleash management time.
Finally, the Government needs to look creatively at unlocking regional ambition. Freeport’s are a good policy but are only half of the solution. To boost national productivity we need to go further, with a series of low-tax, liberalised zones. Given Lancashire’s strong manufacturing base, our area would be an ideal location for the first such zone.
I’ll be meeting with the new PM, whoever that might be, as soon as the Parliamentary session begins. And will be urging them to take the bold moves to ensure Lancashire businesses can continue to grow.
