Liam Fox is a former Secretary of State for International Trade, and is MP for North Somerset.
The successful development of vaccines by the world’s largest – private sector – pharmaceutical companies brings much-needed optimism as we look forward to 2021. Yet, any political respite for the Government is likely to be short lived, as the focus inevitably shifts towards the seismic economic impact that the coronavirus has created at home and abroad.
As the Chancellor said at the weekend “people will see the scale of the economic shock laid bare”.
The UK’s overall debt has now reached 100.8 per cent of gross domestic product (GDP) – a level not seen since the early 1960s. It is terrifying to imagine where we would be if the public finances had not been improved to the extent they have over the past decade. The most recent Bank of England forecast estimates that unemployment may peak at around 7.7 per cent in April to June of next year but could be as high as 10 per cent.
The key to the post-Covid-19 recovery will rely on the ability of Britain’s small businesses to create jobs on the scale that we have seen in recent years. At the beginning of 2020 there were 5.82 million small businesses (with 0 to 49 employees), 99.3 per cent of the total business population.
Despite the unprecedented support from the Government through the Coronavirus Job Retention Scheme (the furlough) which has been extended to the end of March 2021, the Business Interruption Loan Scheme and the Self-Employment Income Support Grant, many small businesses fear that they may not survive the transition to the economic “new normal”.
The unprecedented government assistance has masked the fact that this group has suffered more than most in the varying degrees of lockdown that we have experienced since March, with some still struggling to get lenders to support them.
The longer that lockdown continues, the more that demand for their goods and services is likely to be depressed and their viability threatened. Many fear they may not survive to see the recovery. That is why, in his spending statement this week, the Chancellor must make clear the Government’s commitment to Britain’s SMEs, for this must be an unambiguously private sector-led recovery.
While there are understandable demands to pump more funding into the public sector, we must restore the habit of making sure we have the money in the bank before we start spending it.
Unless we are able to grow our economy through the private sector and generate more national income, then we will be back in the territory of having to choose between damaging tax rises or unpopular spending cuts.
Our ability to borrow heavily during this crisis has maintained the viability of a large part of our economy but an inability to control future borrowing will be deeply damaging to our long-term prosperity and our ability to fund the quality public services on which we depend.
I would like, in his financial statement, to see the Chancellor replace or at least add to David Cameron’s policy test which was “how will this affect and be perceived by every family in Britain”. The new test would be “the entrepreneur test”. This is in line with his natural instincts.
We must assess how every bit of legislation and every regulation will affect the wealth creating part of our economy and our every statement and every speech should be mindful of the message it sends to our small business community.
We must ensure that we are not only a great place for business start-ups but that we can deal with the lack of capital that often results in a failure of scale ups. We must ensure that the elements that make the United Kingdom such an attractive place for foreign direct investment continue – a stable regulatory framework, an attractive tax environment, flexible skills in our labour force, access to quality higher education, access to tech and gold standard protection for intellectual property. As the world’s third largest destination for foreign direct investment, we are already strong in all these areas.
In the 1980s, the Conservatives demonstrated our commitment to the ownership society through our totemic policy of council house sales. The Conservatives must now be seen as the natural ally for every white van man and woman, every tech entrepreneur and every corner shop owner. The Chancellor must make us unequivocally the party of small business.