Businesses are in a race for survival and many have already fallen at the hurdles that have arisen since the pandemic started taking its toll almost a whole year ago now.
We have been very clear that, as Chancellor Rishi Sunak puts his Budget in place, support will continue to be needed until businesses can reopen. Come Budget day on March 3, we need Mr Sunak to hold his nerve and not pull the plug on business support prematurely – particularly as we approach the final hurdle. As the vaccine roll-out expands and transmission numbers continue to fall, we are ever closer to the possibility of being able to open our doors, trade and bring our employees back.
To mitigate the economic damage caused by lockdown, support schemes put in place by the UK Government, including the coronavirus job retention scheme, financial loans, and the self-employed income support scheme, have saved many businesses and jobs.
That said, support for overhead and fixed costs has been less generous and there has been much frustration that additional support will be required. The current drip-feed approach to business support measures is too short term and leaves businesses unable to effectively plan, to invest, and have the confidence to hope for survival and growth.
Of the support schemes, furlough has been seen by many businesses as the most effective and most widely adopted measure. The Bank of England has acknowledged the scheme is masking what otherwise would be much higher unemployment figures.
But if the Chancellor does not extend furlough in some form, the risk is that all the good work and public finances invested in supporting jobs will have been wasted. Why pay almost the full price for something only to cancel the order at the last minute – and it’s non-refundable.
There are other levers that the UK Government can pull to support jobs.
Even before the pandemic, businesses were concerned about the cost of maintaining or increasing their workforces. Our research indicates that a significant number of jobs are at risk of being lost in the months ahead as businesses struggle to rebuild cash flow and demand quickly enough to cope with the financial costs coming at them.
A highly effective way of preserving jobs is reducing non-wage labour costs. We believe an immediate route to safeguard jobs, and to help create new ones when the economy can fully reopen, is a temporary but significant reduction in employers’ national insurance contributions.
We also hope there will be opportunities and announcements which will enable and encourage businesses to invest. One simple way to do this would be to ease the tax burden by extending the VAT deferral until at least the end of 2021. Extending options for the repayment plan even further, including extending the end of March 2022 deadline for paying deferred VAT instalments without interest, should also be considered.
We must also see the reversal of ill-thought-through policies such as the punitive VAT reverse charge for the building and construction trade. The Chancellor needs to show leadership by supporting business investment.
Clearly government cannot fix all the challenges which are ahead of us. But now would not be the time to consider tax increases – there are other more creative and innovative ways of increasing the tax take.
Following the Chancellor’s Budget announcement, I am looking forward to joining The Herald’s Iain Macwhirter and fellow panellists at The Herald Budget Briefing virtual event. It will be a useful occasion to identify what was good about the Chancellor’s Budget – and what could have been better. We will mark the score card.
Liz Cameron is chief executive of Scottish Chambers of Commerce and joins the panel discussion at The Herald Budget Briefing on Thursday, March 4.