Alex Crowley is a former Political Director to Boris Johnson and microbusiness owner.
Of the many moral dilemmas in this emergency, perhaps the thorniest is the question of who ‘deserves’ economic support and who does not.
The Chancellor has been broad and generous in his support for millions of people, but the realities of economics has seen difficult choices made as to where to draw the line.
One such decision negatively affects a group of people with whom Conservatives should naturally identify and have an important role to play in any future economic recovery.
I’m talking about microbusinesses. Often started, owned and run by one or two people. Sometimes they can afford full time employees, sometimes not. Many operate in industries where revenues are unpredictable.
They work in construction, creative industries, events, food and hospitality. They took a risk and left the comfort of a full-time job to start something new. They work from their kitchens, garages and vans. They go all in to pursue that most basic of human desires – the creation of something you can call your own.
The successful ones grow to create thousands of jobs. It is how every company you’ve ever heard of started life. Today, there are around two million such enterprises.
Many followed government advice to set up as a limited company, in order to keep their personal and business finances separate. Entirely sensible advice to encourage people to take that leap.
Whereas the incomes of the self-employed have rightly been supported by the Chancellor, if you are an owner/director of a limited company you are excluded. This wasn’t an oversight. It was a deliberate drawing of the line. Many people whose livelihoods are in their microbusiness are now in deep financial trouble.
They cannot access small business grants, as many either do not operate from commercial premises, or use shared spaces where only their landlord is eligible for the grant. They can furlough themselves but are then prevented from carrying on business.
For many, the loans offered by Government are merely adding to existing debts (although the latest Bounce Back Loan Scheme is an improvement).
Why has the Government done this? There is, of course, the long-standing Treasury animus towards individuals who set up as a limited company. They believe them all to be personal service company, tax-avoiding charlatans that they’d really rather discourage. See the long-running IR35 row and, for those of a certain political vintage, Ken Livingstone.
Politically, I imagine Ministers wanted to avoid a situation whereby media personalities, footballers and celebrities who operate through companies could claim income support in this way. Quite right, too.
I get the political caution. But the Whitehall view is simply prejudice from a cohort who have little personal experience of what it’s like to start a business from nothing.
Let’s deal with Treasury objections head on. Yes, many owner/directors of microbusinesses have a small basic salary and pay themselves through dividends when they are in profit. Yes, there are tax advantages to this, just as there are to being married, passing on the family home to your children after you die and much else besides. A moral counter-point: microbusinesses often pay a higher percentage in Corporation Tax than multi-nationals (a builder can’t ‘book’ sales in, say, Dublin).
They operate in this way because they have to. Revenue fluctuates and for many it is seasonal. Owners keep money in the company to pay staff, freelancers and suppliers before themselves. They take money out only when they need it. And only – this is really crucial – when they are in profit (a legal requirement). Many are not in profit. And certainly not now.
The Welsh and Scottish governments have recognised this problem, creating grant schemes for some microbusinesses (although continuing to exclude sole company directors). It seems quite absurd that the fate of many microbusinesses rests, in part, on geography.
The new loans will help. But the Government should go further. The Small Business Grant scheme should be extended to cover all microbusinesses, regardless of property tenure (capped at a percentage of turnover). The furlough scheme should be amended to allow sole company directors to carry on working. And they should be included in the self-employment support scheme (with appropriate limits).
There is a moral and economic case for action. In normal times, microbusinesses are the least burdensome to the public purse. They generate tax revenue and create jobs. When they do well, we all benefit through economic growth. If we abandon them when they are down, who do we expect to come forward to start the enterprises of the future?
It should be disturbing to all Conservative supporters that it might be our Government that leaves the grassroots of business to their fate in this way. Politically, it’s a very strange world where Ed Miliband is their champion.
If we allow our most natural supporters to be sunk by choice – as this policy is – they will surely conclude that they have nothing to fear from a Labour government in the future. And that would be a senseless political own goal. Not to mention a moral misstep.