Rishi Sunak has pledged to “stand by” budget-squeezed households as he comes under increasing pressure to act to support the economy amid rocketing energy bills, widespread inflation and an increase in national insurance contributions from next month.
In Lancashire, business leaders all point to rising costs as a major threat to the county’s economy and commerce and have offered a raft of ideas to help.
Babs Murphy, chief executive of the North and Western Lancashire Chamber of Commerce said: “The Spring Statement is taking place against a backdrop of soaring uncertainty surrounding both the UK and global economy, so a business-as-usual approach from Chancellor simply won’t do.
"The surging cost pressures produced by the ‘cost of doing business crisis’ will continue to lead to increased prices and fuel the cost-of-living crisis currently being faced by people across the country.
“Together with the chamber network we are calling for the Government to adopt a five point plan to tackle the cost of doing business crisis. This will give the business community a chance to stabilise without having to seriously increase their prices, cut jobs or cut the investment that is so vital to sustaining our economic recovery from Covid-19.”
The plan calls for:
A year’s delay the National Insurance rise due next month, to give firms financial headroom to weather the unprecedented surge in costs.
Bringing in a temporary energy price cap for small businesses to protect them from some of the price increases they would otherwise face, offering the same protection as households.
Creating additional financial support, by the expansion of the energy bills rebate scheme for households to also include small firms and energy intensive businesses, a new support fund, administered by Ofgem to support the smallest firms with their soaring energy bills and a six-month extension to the Recovery Loan Scheme until the end of 2022.
A two-year moratorium on policy measures that increase business costs, including no new business taxes or added regulatory burdens, but excluding only evidence-based changes to the National Living Wage.
A commitment from the government’s Supply Chain Advisory Group and Industry Taskforce to continue to work with industry to urgently deliver practical solutions to ease supply chain disruption and labour shortages.
Federation of Small Businesses development manager for Lancashire and Cumbria, Paul Foster, said FSB businesses were concerned about higher costs at a time when many were either just starting to recover or struggling to recover from the pandemic.
He said: "Covid is still impacting some businesses, and many more are just about managing with the debt they took on to get through the last two years. As costs continue to increase there is the risk that we derail a very fragile recovery. Consumers are tightening their belts, which means less money is being spent in local shops and venues.
He said the FSB wanted to see the Government offset rising costs of employing people by increasing the Employment Allowance, which would mean small businesses get some relief in terms of their national insurance costs.
They also want business rates reductions for businesses with properties which don’t currently get full rates relief and support for fuel and energy bills for businesses as well as households.”
He added: “The Chancellor has a choice: plough on with damaging tax hikes, or take steps to protect the most fragile, and empower small firms to deliver his ‘culture of enterprise’ vision.
“The time to deliver a low tax, high investment, dynamic economy is now, not later in the political cycle. The Chancellor cannot control the wholesale price of gas and oil, but he can control tax policy.”
Tony Medcalf, tax partner at Lancashire accountancy and advisory firm MHA Moore and Smalley, believes levels of inflation not seen for 30 years may force Rishi Sunak to intervene.
He said: “It’s possible the chancellor may decide to suspend the planned 1.25 percentage points increase in national insurance contributions, having so far maintained the increase would still be coming in in April.
“The situation with Ukraine may see the chancellor take action to reassure the public and the markets. For example, I wouldn’t be surprised to see some intervention to urgently accelerate the supply of renewable energy in the UK and improve the security of energy supplies however that may be done.
“I have seen calls from some business groups for the chancellor to provide clarity on what will happen to the super deduction on new plant and machinery with the tax break due to end in March 2023, but I think it’s more likely that will wait until the budget in the autumn."
Matthew Johnson, associate partner at North West based accountants and business advisors WNJ said the chancellor was coming under growing pressure to scrap the 1.25 per cent hike in National Insurance.
He said: “Small businesses are really feeling the squeeze. Confidence is starting to waver. Inflation is running at more than five per cent and is set to rise even further. Gas and oil wholesale prices have rocketed.
“The spring statement is not usually a time for major policy announcements or movements in areas like tax, they are normally dealt with in the autumn Budget.
“However, with the economy and individual businesses feeling the strain, the chancellor is being urged to use this statement as an opportunity to provide support on several fronts.
“We’re unlikely to see any windfall tax on oil and gas companies, something the Labour opposition has been very vocal in promoting.
“However, there are other options available to him. With fuel costs soaring at the pumps and reaching record levels, could there perhaps be a cut to fuel duty?"