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Home News David Raynes: The Treasury neither likes nor understands small firms

David Raynes: The Treasury neither likes nor understands small firms

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After 36 years in the public sector and being the recipient of that extraordinary thing, a relatively generous Civil Service pension, I may not be the best person to identify with the often precarious existence of the truly self-employed.

What I am sure of, after 10 years of post-retirement, self-employment and VAT registration, is that I can do it rather better than the Treasury officials, who poleaxed the career of Philip Hammond when they pulled the NIC rise, like the pasty tax before it, out of their bottom drawer and fed it to an unwary neophyte Chancellor. Self-employment is a world away from the secure life of  a Treasury policy maker.

The impression given by media analysts, especially at the BBC, before Mr Hammond’s forced climbdown, was that the discrepancy with the Tory manifesto was the only problem with raising NICs for the self-employed. It was much more than that: I had a letter published in the Sunday Telegraph here.

Plainly Treasury officials do not do politics, or, perhaps they do?  They are not stupid people even though, often, they seem unworldly.  Certainly Mr Hammond’s spads were naive but in Hammond’s place I would be questioning if someone in the Treasury deliberately set out to damage the Tory party.

Damage the Tory party it did. Despite the U-turn some of the damage will be permanent.  It came at the same time as moves to remove the simplified VAT arrangements for small traders and increasing pressure from government for quarterly reporting of business turnover.

An impression is abroad and growing that the Treasury does not like self-employment, that it believes it erodes the easy take from PAYE and that there is a determined project afoot to utterly nobble the self-employed and, artfully, make their taxation as much like employment and PAYE as possible. The feeling has been growing under both the current and the previous Chancellor. It is a feeling the country and the Tory party can surely not afford.

The Tory party has always encouraged (or used to) entrepreneurial instincts. Certainly that was the impression it tried to give.

There is a good argument that the UK’s increasingly vibrant self-employed economy is part of what differentiates the UK from competitor nations and that to get through the uncertainties of Brexit, we need to foster and encourage hard work, initiative and, particularly, risk-taking.

Even now, the unwary can end up being asked to pay income tax (based on previous year’s profits) on supposed earnings not yet received, but billed in the current tax year. The thought of having that battle four times a year, the absence of sickness  and holiday pay, the uncertainty around bidding for and securing the next contract, the cash flow issues, the VAT complications (now at the mind numbingly high and black economy inducing rate of 20 per cent) will just be too much. All these factors will combine to stifle initiative and ultimately kill some sections of the economy.

Yes, you Treasury mandarins, the arrangements around self-employed working are untidy; yes, they are out of kilter with normal employment.

The Tory Party needs to be, if it needs to be anything at all, pro small business, and the country needs that too.

The UK needs to be the best place in the world to start and run any sort of business. It has to be worthwhile to do that. If that means the taxation system being slightly unbalanced, so be it.

(Image: Kurt Bauschardt)

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David Raynes
David Raynes is a former international customs and anti-corruption consultant.

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