Plight of Small Businesses

The Government's task is to undo the damage it has already done to Britain's economy. To make the fight against inflation the top priority. To learn to run the nationalised industries properly so that the losses they make year by year become smaller, not bigger. That is enough for any Government to be going on with. And the present one is a long way from achieving success. So let our message to the Government be:-

“You mind your business and leave us to mind ours” . That way we'll all do better.

Today I want to speak plainly, but also hopefully, to bring a message of hope to the business community, of which a full share will be had by the people who run our small businesses.

We recognise that the private sector creates the national wealth from which taxes are siphoned off to sustain the public sector.

We cannot ignore that fact, but as a Party which wants private enterprise to flourish, we must see that the tax burdens are not so great that they break or seriously weaken the businesses themselves. [end p1]

We shall therefore need to lift from the business community the disparagement and discrimination to which it is subjected now. Particularly, we must encourage smaller businesses for they are the soil in which tomorrow's prosperity grows.

At a time when unemployment is growing fast, we should note that over a third of those in the private sector are employed in small businesses.

Small firms also launch a quarter of our new products. We need inventions and new products if we are to have jobs, particularly in areas like Scotland.

When one talks of small businesses, some people feel that small businesses may be of small importance. That is not true of their contribution to the national economy as a whole, nor to Scotland's economy.

Indeed, for Scotland the future of the small business and of the self-employed is very important. Scotland has a relatively high proportion of small businesses and therefore suffers more severely from the beating they have taken recently.

However, as I know from personal experience, business on a modest scale has something special to offer on the human as well as on the economic side. Employer and employee know one another from daily contact.

What is important too is the variety which small businesses add to life—the individual attention, the trouble taken, the proprietor putting himself out for the customer. Frequently those who run these firms take an active part in the life of the local community with which their history and their future is so closely intertwined.

Moreover, it is the small firm which is never lagged and insulated against competition by any vast corporate anonymity. It must keep the consumer sweet by watching prices, servicing and deliveries. [end p2]

It has been said that every recruit in the Army carries a Field Marshal's baton in his knapsack. So too in commerce and industry. The small firms of today can be the large firms of tomorrow.

We recognise that businesses don't just happen; they are the product of hard work, commercial judgement and ploughing back savings for improvement and expansion.

Our tax policies must take account of these things. Today, small firms are beset by problems.

The new model businessman is weighed down with unpaid, unproductive administrative work done free for the Government. He must try to understand and comply with more and more Government regulations. Only last week, the owner of one small business told me that he had had 31 official-paid envelopes on his desk in nine days.

Look at the changes that have been made to VAT. At least we kept it at a single 10%; rate of almost Roman clarity. Now, with two rates and the useful therapy of working out 8%; as a fraction, there is much more work and less tax. This leaves the Government borrowing, printing and inflating—something they do understand. [end p3]

The Self-Employed have been singled out for the most unfair overhead. They have seen a reduction in the National Insurance contribution which they collect from their employees while their own contributions have been savagely increased. We shall see to it that all the self-employed have justice.

A perennial problem for small businesses is their shortage of working capital, so many would expand more and increase their contribution to the nation's wealth if they had more capital. But it is a characteristic of these businesses that they are financed out of the money their owner-managers plough back into the firm.

Unfortunately, inflation has now turned so many businesses into ravenous consumers of money. With inflation at 12%; when we left Office, things were difficult. Now that inflation is 26%; companies need twice as much working capital for the same volume of business. The need for cash is greater. But the hungry Exchequer puts its hand into the till, thereby reducing the company's bank account and bloating its overdraft.

Small businessmen do not want to be subsidised, they want to be left with more of their own money!

To the load of Corporation tax, the Government has added the burden of Capital Transfer Tax. In addition, Capital Gains Tax operates more ferociously in a time of inflation. Indeed, it ceases to be a Capital Gains Tax and becomes a tax on capital itself. On top of these taxes there is the mounting fear of a new Wealth Tax. We know already of firms which are reducing their investment and expansion plans so that the owners would be able to pay a Wealth Tax and allow the business to survive.

A further result of the Wealth Tax would be the takeover of thriving concerns by larger companies. We are pledged to give Scotland devolution with a directly elected Assembly. But it cannot make sense if, on the one hand, the politicians are encouraging devolution while, on the other hand, taxation policy is forcing the amalgamation of smaller firms into larger and larger units. This trend could result in taking decisions away from Scotland and concentrating them in the South. [end p4]

The Wealth Tax will increase the fear of centralization.

All these fears are genuine and damaging.

Disraeli once accused his opponents of “regarding posterity as a mule to be loaded with taxation” . Yesterday's exaggeration is today's understatement. The load has become too great, the mule is already on his knees. Now the Conservative Party wishes to distinguish between equitable tax, and those taxes imposed by way of social vengeance. In consequence, we are now examining the whole area of capital taxes, especially those on small firms, to ensure that such companies can survive and can continue from one generation to the next. We cannot make life easy, but businesses must be allowed to grow stronger, to contribute to our productive resources and the continuing need to create wealth.

Above all, we should treat such businesses and the people who run them in a sympathetic way. They want to become prosperous. They are quite right to do so. As their businesses prosper they create the jobs for tomorrow.

A private sector can only be run by people who want it, not by a Minister who publicly promises to make it squeal.

We will create an atmosphere in which enterprise and hard work will pay off, and where initiative will be rewarded.

We recognise that a growing proportion of our people want to have a real and personal share in the nation's wealth—to be owners, makers and sellers. There is a deeper purpose to all this; throughout history the commercial impulse and the desire of people to make their own prosperity have gone with a free and diverse society. Shopkeepers have their failings, but unlike the functionaries of local and national government, they are nobody's creatures, nobody's payroll, nobody's liverymen. [end p5]

The experience of the underemployed regions of Scotland, Wales, the North East and Lancashire, was being rescued from the worst consequences of the slump by trading estates.

It was the function of small companies, making everything from ball-bearings to electric filaments, to fill—with a hundred jobs here and three hundred there—the void left by empty shipyards and derelict mills.

Such a rescue through a thousand small crafts and the entrepreneurs who risk the money may again be needed if we are to create the jobs we so surely need.