Jeremy Corbyn is pitting small businesses against corporates

Labour's left-wing leader wooed small firms with promises on late payments and taxation.

by Jack Torrance
Last Updated: 13 Apr 2017

Jeremy Corbyn received a surprisingly warm welcome from the FSB this morning. Not the Russian security services (which wouldn’t have been surprising at all) but the Federation of Small Businesses, the organisation that lobbies the government on behalf of Britain’s small firms.

Small firms, with their dislike of red tape and higher taxes, are generally seen as a core part of the Conservative vote. But the Labour leader clearly sees them as a potential ally in his populist crusade against big business and the political elite.

‘What people running small businesses tell me is that they’re fed up with there being one rule for them and another for big business – giant companies seem to be a law unto themselves’ he said, echoing the anti-establishment (if not the anti-foreigner) rhetoric of Farage, Trump and Le Pen. ‘My local independent coffee shop can’t spend thousands on accountants to avoid paying tax, but a big chain of coffee shops can, and does.’

He was especially critical of the government’s cuts to the corporation tax rate. In the past there were two rates - one paid by small firms with profits of less than £350,000 and a higher rate for the rest. Both rates have been falling since the ‘70s but the Conservatives abolished the separate rates in 2015, putting all businesses on a 20% rate that will fall to 17% by 2020.  

This, reasons Corbyn, is unfair on small businesses, because while all businesses will be paying less, small firms will be paying less less. ‘There’s clearly been a bias [against small businesses] here in the approach the government has taken,’ he insisted.

He then revealed his own plan to level the playing field. While he intends to raise corporation tax to pay for more skills training, small firms will be exempt. He’ll also exempt small firms from onerous plans forcing them to report their finances quarterly, and create new regional development banks to fund start-ups.

But what really got the audience’s heads nodding was his plans to tackle the ‘national scandal’ of late payments, one of the small business’s biggest bugbears. Corbyn railed against high street names including M&S and Vodafone for allegedly failing to pay their suppliers on time. ‘No small business owner should go begging to the banks or even remortgaging their homes just because a customer considers themselves too big to pay on time,’ he said. ‘A Labour government will declare war on late payments.’

He’s right to raise this issue. Late payments really are a scourge that leave many small businesses on the financial precipice and prevent companies from growing as quickly as they ought to. The FSB reckons 50,000 businesses that went bust in 2014 wouldn’t have done if they had been paid on time.

But it’s not a problem that will be easily solved. Labour’s plans to force public sector outsourcers to pay their own suppliers could make a substantial difference, though it’s something the government has tried already. Avoiding paying suppliers until necessary is a habit for British businesses big and small alike, a cultural problem that it unlikely to be solved by government firepower alone. It’s hard to think of any government in recent times which has not had a campaign against late payments of some kind, and yet still the practice continues. 

Corbyn’s attendance was well received. The FSB’s policy director Martin McTague described him as a ‘really good supporter of the FSB,’ and praised his ‘reputation for fairness.’ The audience gave him a decent clap and even joined Corbyn in shouting down a BBC reporter who had the audacity to ask an unrelated question about the civil war in Syria (normal practice at events featuring the leader of the opposition and not at all ‘rude’ as one attendee moaned).

The Labour leader did a decent job of showing he understands some of the pressures small firms are under (though he was left flummoxed by a question about the government’s cut in the tax-free dividend allowance, a controversial part of the latest budget). But pitting small businesses against large is divisive and unreasonable.

Small firms may be the ‘backbone’ of the economy, but they aren’t the be all and end all and many of them rely on bigger companies that are their customers, suppliers and financiers. While Corbyn sweet talks Britain’s entrepreneurs he bad-mouths big business, a luxury that only those in opposition can afford.

Of course multinationals should pay their fair share of tax and treat their suppliers with more respect.  But plans to raise corporation tax and suggestions of a maximum wage for bosses would be bad for the economy and harm UK Plc. 

Raising the minimum wage to £10 per hour by 2020 though not a lamentable aim could also have undesirable knock-on effects if productivity doesn’t increase alongside it (for reference it would mean the lowest-paid full-time worker would earn a not-too shabby salary of £20,800). 

It’s clear that Corbyn is no longer the hardcore ‘property is theft’ Marxist that many would like him to be seen as, but his contempt for big businesses, which employ millions and still pay a fair of whack of taxes is unfortunate.

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