Small businesses in the UK have just received some good news amidst all the recent doom and gloom.
Liz Truss, the new prime minister, told a Conservative Party conference in Birmingham on Sunday that she would cut red tape for tens of thousands of small businesses, often seen as the engines of economic growth.
It will do this by amending a rule rather than creating a new one, specifically by changing the way a small business is defined.
“By raising the definition of a small business, in regulatory terms, from 250 to 500 employees, we will free 40,000 more businesses from red tape,” Truss said in a statement.
This aspect of his plans should sit well with almost all small business owners, regardless of their political leanings.
Truss has come under fire from markets and critics in recent days for a controversial mini-budget announced last month. Amid high inflation, his plan calls for the biggest tax cuts in decades while increasing government borrowing and spending.
News of the plan, which the opposition Labor Party described as “trickle-down economics and criticized by some in Truss’s own party”, sent the pound plummeting.
Truss told the BBC on Sunday that he wished he had “set the ground better” to announce the budget, but insisted he is sticking to his plan despite the market chaos.
Particularly galling to many was the decision to cut taxes for the UK’s highest earners. Truss said on Sunday the decision was made by Chancellor of the Exchequer Kwasi Kwarteng.
Meanwhile, three-quarters of UK voters, including 71% of those who backed the Conservatives at the last election, believe Truss and Kwarteng have “lost control” of the economy, according to a poll by the Observer of Opinium published this weekend.
Truss “right to guide growth”
However, Tony Blair, former prime minister and leader of the Labor Party, said Truss was “right to target growth”.
While he acknowledged that his own approach would differ from Truss’, he told host Ian Bremmer on the GZeroWorld podcast this weekend:
“You have to raise growth rates. One of the first things you realize in government is that if growth is strong, revenues are strong. If revenues are strong, you can spend money on public services. If growth rates are strong growth rates are low or you’re in a recession, suddenly everything looks worse and you have to cut services.”
Mark Littlewood, director general of the London Institute of Economic Affairs, told Sky News last month that moving away from high taxes and regulations would revive economic growth, adding: “A rising tide lifts all the ships”.
Business Secretary Jacob Rees-Mogg said of the plan:
“Regulation supports incumbents, it supports big companies against rivals. New employment generally comes from smaller companies. You don’t have to regulate them as if they were big companies: you stop the level of growth, you don’t get the growth you need. This isn’t a mad rush to eliminate all safety regulations. It’s about making sure the regulations are the ones you really need and they’re about real problems that businesses face.”
Julia-Ambra Verlaine, who worked on the currency desk at Barclays before covering the markets of the Wall Street Journal, suggested that the UK and the pound could make a comeback. Asked to The newspaper podcast on Thursday which of several coins would he take now, he replied:
“I would like to take the pound. I think in the long term I would bet that they can recover and I would want to buy their currency at the very least.”
With markets showing little confidence in Truss’ plan so far, it remains to be seen how far the pound falls.
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