3 alternatives to the UK’s SME rates rise shambles
Indulge me. I’m in charge of state, or the head of economic policy. It’s clear to me that the economy I steward is in need of a resilient domestic market to buffer against the headwinds of globalism. I’m struggling to get megacorp inc. and third generation Asquiths to pay anything near an equivalent ratio of tax as everyone else. My solution? Anything but raise rates. Literally, anything. Here’s three ideas to mitigate it.
This April, millions of SMEs across the UK are going to be hit by a ‘rates’ rise. What are rates, you ask? Well, it’s a tax on doing business, a tax to exist. It used to be the price businesses paid for getting their rubbish collected and contributing to civic services in the area, that type of thing. It’s a key means for local authorities to derive income.
That might have made sense when it started, but that was when most of the revenue derived from said SME sloshed around locally. Not so any more. In fact, it’s bonkers to use this archaic tool now and simply stifles everything the economy needs to grow.
Equally, in many areas now, old market towns or county hubs are being brain drained. If they are even remotely close enough to London to commute, all to often the talent doesn’t stay locally, work locally, it pays silly train fares to head to the Big Smoke. After all, London is waiting.
When you consider the way councils get their budgets – some is derived from council tax, some from rates, more from local fines and amenities. Then, I think, the government gives them a central stipend.
They don’t get any income tax or corporation tax – that goes to HQ.
When you consider a region may be losing a sizeable proportion of talent to London – and that London drives the bulk of government revenue, something frays.
Consumers underpin the economic equation – their C (consumption) is the keystone of growth. With the wages many get from [somewhere else] work and their employer [unlocal] they spend. Where? Well, if they spend a lot of their week in London, it’s likely London gets the bulk. It gets the brekkies, lunches, ad hoc gifts and evening drinks. It gets a huge amount.
A great business, however, like a thriving restaurant, hotel, or maker can suck in new consumers and tourists. It can grow, multiply its model and export. We need that times lots.
What if rates were zero? What if a denizen of a county that chose to live, work and stay in their county – as a business maker or talent a local business never expected to employ. What if that offset the hundreds of pounds charged in rates but also made local business better off.
1) Postcode council tax .
(I’m working on the name.)
Those leaving the county, commuting else where, going beyond the shire or council border pay. They pay extra. Or at least those staying locally pay less. Over time, the incentive is not to charge off on a motorway, its to work from home, to work locally, or to start a business locally.
2) Local VAT apportionment
VAT is added to consumption. Is it fair that your local economy has to send every penny of this tax to HQ? No way! Some of that should go to the council to pay for the bins and civic costs to the economy.
3) decentralised companies house, annual license
Companies House. Hmm. Is it not a bit strange that your local council can’t issue a company number locally? It is.
Every setup cost for a business gets sent to one big mothership. It’s odd that I pay annually for a website URL – giving all the web’s stakeholders millions of payments of incremental revenue at scale – yet the local council gets not a penny of local businesses that line its high streets? Not a penny.
Companies house should be spread across the counties, too. Instead of a one off fee to start a company. A business should pay annually. A relative sum that reflects a mixture of where their HQ is (you guessed it, higher for a multinational), how many employees they have, how many branches they have.
That’s it. My three ideas. There might be better ones. I think these solve a few systemic issues and create a level playing field for the regions. There is also far more regions can do to unlock that – but municipal bonds are for another day…
Whatever you think, it’s clear that local SMEs should not pay the price for the state of the national economy and trimmed local budgets. Not another penny.