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How will the next prime minister affect your small business?

4-minute read

Sam Bromley

21 July 2022

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The Conservative Party is set to choose its next leader following Boris Johnson’s resignation.

With that person becoming our next prime minister, how might they affect your business? We examine the final two candidates below.

Updated 1 August to reflect recent policy announcements from the two candidates.

How will the next prime minister be chosen?

As the Conservative Party has a majority in parliament, the winner of the current leadership race will become the country’s next prime minister.

Conservative MPs have narrowed down the candidates to Rishi Sunak and Liz Truss.

Grassroots Conservative Party members will now vote on who they want to be leader, with the winner announced on 5 September.

Businesses should expect to see campaigning from the candidates in the meantime, designed to appeal to members of the Conservative Party.

What would Rishi Sunak mean for small businesses?

As Rishi Sunak was Boris Johnson’s chancellor until very recently, businesses are able to judge him on what he has and hasn’t done while in office.

At his Mais lecture in February 2022, Rishi Sunak called for a lower tax, higher growth economy, creating “the conditions for private businesses and individuals to thrive”.

But he believes that this needs to be done in a way that tackles the country’s long-term challenges.

Rishi Sunak wants to prioritise business tax cuts

Rishi Sunak has positioned himself as the ‘fiscally responsible’ candidate, believing that government debt post-Covid has to be paid without borrowing more.

This means sticking with the tax rises he implemented under Boris Johnson, saying: "Once we have gripped inflation, I will get the tax burden down. It is a question of 'when', not 'if'."

His plans for tax and spending are consistent with his time as chancellor:

  • the 1.25 percentage point National Insurance hike will remain in place
  • corporation tax will increase to 25 per cent in 2023 (but small businesses with profits below £50,000 pay 19 per cent – only large businesses earning more than £250,000 pay the full rate)
  • at the last Spring Statement, he announced a 1p income tax cut in 2024

While previously announced tax rises will stay in place, he’s said he'll prioritise business tax cuts in the future.

And as the leadership race continues, Sunak has since pledged tax cuts:

  • a cut in the basic rate of income tax from 20 per cent to 16 per cent within the next seven years
  • VAT removed on energy bills for a year, to help with rising costs
  • investment tax cut in the autumn to replace the ‘super deduction

As chancellor, Rishi Sunak reviewed business rates, but didn’t make any wholesale reforms.

A review of EU laws that are ‘getting in the way’ of business

Rishi Sunak voted to leave the EU.

He’s said that in his first 100 days, recommendations will be delivered on which EU laws to scrap.

These are a set of 2,400 laws that are “getting in the way” of businesses, he claims, as they’re still on the UK statute book following Brexit.

Rishi Sunak previously announced the creation of 10 UK freeports at the Spring Budget 2021, which will have simple taxes and benefit from import and export tax reliefs.

Balancing jobs and growth with net zero

The UK has a net zero target to reduce emissions by 2050, so that the gases released are balanced by the gases taken out.

Rishi Sunak has committed to the measure, but noted that going ‘too fast’ risks alienating people: “I think we can get there in a way that's about growth, that's about jobs, that's about industries of the future, and that's the way to do it."

He’s said that he would keep the ban on new onshore wind farms but oversee a massive expansion in offshore wind. He wants the UK to be energy self-sufficient by 2045.

What would Liz Truss mean for small businesses?

Liz Truss is the current foreign secretary, after showing support for Boris Johnson when others in the cabinet were resigning.

She’s said that she has a “bold new economic plan that will cut taxes, grow our economy and unleash the potential of everyone in our United Kingdom.”

Liz Truss wants to cut business taxes

Liz Truss is marking herself as the candidate who'll cut taxes. She claims that she'll reverse the National Insurance hike, halt the rise in corporation tax, and overhaul business rates.

But the country would need to borrow more to pay for those reversals, with her plans set to cost the Treasury billions.

She wants Number 10 to have more control over the Treasury, with reports suggesting that she’ll have a team of advisers to challenge Treasury ‘groupthink’.

Truss has indicated that she would bring forward the next Budget, currently planned for November, and cut taxes “from day one”. She’d pay the cost of our Covid response back over a longer time period.

She’s said that she wants the private sector to grow faster than the public sector and to reduce the size of the state.

She would also review inheritance tax as part of an overall look at the UK’s tax system.

Delivering on Brexit opportunities for business

Liz Truss campaigned to remain in the EU, but she’s positioning herself as a Brexit candidate in this leadership race.

She wants to “continue to deliver on the vast opportunities that Brexit presents” and will continue with regulatory divergence from the EU.

As foreign secretary, she pushed changes to the Northern Ireland Protocol through to parliament, which are still being debated.

These changes would create different ‘lanes’ for goods entering Northern Ireland from the UK.

Another cautious approach to net zero

As with Rishi Sunak, Liz Truss has committed to net zero. But she’s cautious too, saying we need to "find better ways to deliver net zero" that won't "harm people and businesses".

She’s said that she would scrap green levies temporarily on energy bills to help people with the cost of living crisis.

The levies on electricity bills help fund social and environmental ambitions, for example insulating homes and emission reduction.

iNews reports that this could cost the Treasury £5 billion.

We’ll hear much more from the two candidates on their plans for business over the coming weeks and we'll update the article if we hear anything substantial.

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We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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