James Frayne is Director of communications agency Public First and author of Meet the People, a guide to moving public opinion. The focus of this column is Theresa May’s conservatism for “ordinary working people”.
In justifying higher NICs for the self-employed and higher taxes on dividend payments through the prism of fairness in yesterday’s Budget, Philip Hammond sent out the signal that the Conservatives no longer disproportionately value the culture of enterprise and the growth of small businesses.
The emotional bond between the Conservatives and entrepreneurs – established in the late 70s by Thatcher – is effectively broken.
Under Theresa May, the Conservatives have rightly shifted focus to the great mass of working class and lower middle class families that previous Governments forgot. More than any in recent memory, this Government serves their interests and reflects their political priorities.
Yesterday’s budget had plenty for them: for example, more money for the NHS and social care; better vocational education; and greater consumer protection.
But there’s now visibly a danger that all this spells the end of the Party’s attachment to the risk-taking entrepreneurs and innovators that create wealth and jobs for this country – and those that ensure the economy and everyday life ticks over by providing vital services. Distancing themselves from “big business” makes economic and electoral sense; whacking small businesses doesn’t.
Hammond’s claim that his changes were based on fairness will be rejected by those he’s targeting – and many others too. Very significant numbers of working class and lower-middle class people are themselves self-employed. They won’t see a tax rise that affects them or their family as “fair”.
And it isn’t: the self-employed do not have the automatic protections available to those working for big organisations. The implicit deal – less tax in return for operating in a riskier environment where sickness, injury or an empty order book may be around the corner – has been cast aside. Hammond’s assurances that the Government is seeking to address this risk-reward disparity look weak.
Alienating the self-employed and those that run small businesses seems a tragedy. These very same voters supported Thatcher in enormous numbers and should be persuaded to remain with the Party.
When Policy Exchange produced its major investigation into “just about managing” families, it found the principle of “hard work”, as well as “fairness”, was a value these families hold dear. Voters want to feel that effort and entrepreneurship is rewarded and that the fruits of their labour can remain in the family.
What, then, should the Government do? All the gimmicks in the world won’t make up the harm that these tax rises will inflict. The self-employed and those that run small businesses need – more than anything else – cash in the bank they can use to invest in their business.
Hammond suggested those that run their own businesses are essentially enjoying bumper salaries on the back of ordinary workers. Few business owners will recognise this description; many will be horrified at it. With that in mind, the Government should reverse their plans.
In addition, the Government need to keep a close eye on the Taylor Review, due in the summer. Hammond says he’s seen preliminary findings. They must ensure that the review is firmly on the side of those that run SMEs and that this marks the beginning of a Government programme to encourage people to start new businesses and expand existing ones. Having a long-term political insider in charge is somewhat worrying. Hopefully we’ll all be pleasantly surprised at the outcome.