How do the three main political parties plan to make life more prosperous for the UK’s army of SMEs? That was the topic of a special, pre-election hustings event held at Chartered Accountants’ Hall on Monday 17 June.

With an audience formed from members of ICAEW, the Federation of Small Businesses (FSB) and Enterprise Nation, the event featured three senior MPs who had taken time out of their hectic campaign schedules: Conservative Minister for Enterprise, Markets and Small Business Kevin Hollinrake, Labour Shadow Business and Trade Secretary Jonathan Reynolds and Liberal Democrat Treasury, Business and Industrial Strategy Spokesperson Sarah Olney.

ICAEW Managing Director, Reputation and Influence, Iain Wright welcomed around 160 guests to Chartered Accountants’ Hall, with another 200 guests joining online. The FSB Policy and Advocacy Chair Tina McKenzie MBE and Enterprise Nation Founder Emma Jones CBE moderated the questions, while ICAEW President Malcolm Bacchus rounded off the evening by thanking politicians and questioners alike.

Setting the tone for the questions, McKenzie pointed out that while SMEs comprise 99% of companies working in the UK and employ more than 16m people, their numbers are currently down by 500,000 on the 6m peak achieved as recently as 2020.

Opening gambits

Setting out his stall, Hollinrake said that “whatever happens next”, most of his work would focus on helping SMEs to access finance. He said two exciting points in the Tories’ 10-point plan for business are open finance and regional mutual banks, which he said would “revolutionise the journey for SMEs”, in terms of their ability to access funds.

For his opponents, though, any good intentions for the next Parliament are undermined and overshadowed by the Conservatives’ performance in office. In Olney’s view, an “out-of-touch” government has “crashed the economy with reckless policies”, saddling families and businesses with unaffordable bills and a record tax burden.

For Reynolds, meanwhile, there is “no reasonable or rational case to be made” for a continuation of the Tories’ time in office. “At best, the past 14 years have been disappointing,” he said. “At worst, they have been genuinely chaotic.”

Tax positions

With Hollinrake’s comments on access to finance in mind, Jones pointed out that one way to make more funds available for SMEs is by requiring them to pay less tax. She then invited the MPs to explain how their parties’ positions on tax would affect small businesses.

Reynolds said that Labour had been clear in its manifesto that the party’s plans for raising revenue were hypothecated for set functions. For example, changes to close loopholes in the non-dom tax regime would create a funding stream specifically for the NHS, while the proposed VAT on private school fees would be dedicated to funding state schools. Such policies, Reynolds said, are “pragmatic ways to raise revenue for an immediate injection of funding into public services”.

He noted: “We’ve said on income tax, national insurance and VAT that we would not be seeking to raise them. There’s nothing else in the Labour manifesto that requires taxes to be raised on households or businesses.”

On the Lib Dems’ plans for corporation tax, Olney said that there has been “so much chaos and uncertainty” on this front in recent years.

“Originally, the plan was to cut it to 17%,” she said. “Then the Tories cancelled that to keep it at 19%. Then they said they’d raise it to 25%, before cancelling that to keep it at 19% – and then they U-turned again to raise it to 25% after all. So, we’re proposing at this stage to keep it at 25% – because, above all, we think that businesses need certainty and stability. But within that 25% main rate, there are a range of investment allowances. And that’s something we would want to keep under review – particularly for small businesses.”

On capital gains, Hollinrake said he was aware of “lots of conversations” from political rivals about taxing them at the same rate as income. In his view, that would be “devastating” for investment in the UK. “In an internationally competitive marketplace,” he said, “you would only drive investment abroad.”

If returned to power, Hollinrake noted, the Tories would retain a number of tax breaks – such as Seed Enterprise Investment Scheme and Enterprise Investment Scheme, Venture Capital Trusts, Business Asset Disposal Relief, Business Relief and Agricultural Property Relief. “It’s fundamentally important that people have confidence to invest in those kinds of tax breaks. For businesses that really want to scale, it is vital that those incentives are retained.”

Business support plans

Turning to initiatives designed to help SMEs fill knowledge gaps, Hollinrake said that the Tories are committed to retaining Help to Grow: Management – a 90% government-funded, 12-week ‘mini-MBA’ that enables owners to build their skills levels. The party would also keep the sister programme Help to Grow: Management Essentials, which is completely free and provides owners with two hours of bite-sized learning to support them on their growth journey. In parallel, the Tories are committed to regional growth hubs, tapping expertise that local authorities have absorbed from the abolition of Local Enterprise Partnerships (LEPs).

Olney said that the Lib Dems would revert to the LEP model as part of its broader industrial strategy, with relevant funding to come from the party’s proposed £8.4bn Green Investment Programme. For Olney, her party’s strategy could create a “purposeful partnership between government and business, with the aim of tackling the great economic and societal challenges of our time. And we very much see LEPs being part of that and integrating with an industrial strategy.” She explained: “Part of the value of an LEP is the role it can play in developing skills, where there are regionally based sectors of the economy, to ensure that young people are being encouraged to develop the skills that those sectors will need.”

For Reynolds, the key to better business support is a greater focus on devolution. “We are very proud of Labour’s mayors up and down the country,” he said. “I find that business likes those structures. It likes the convening power of a mayor. It likes the economic geography that a mayor covers. And I think that’s the best way of tailoring local business support to those economic conditions.”

He added: “The role of government at national level should be stability and a framework that has national objectives on things such as the energy transition and skills. But that’s got to be delivered in a way that works for business. And that element has to be a balance between a national policy framework and local economic leadership.”