Government micro-business policy hobbled by lack of data

Posted on Jul 7th, 2016 | Expertise

Last week saw parts of the Finance Bill 2016 go through the Public Bill Committee stage in Parliament. We were extremely grateful to SNP finance spokesperson Roger Mullin MP proposing an amendment which highlighted our concerns over the planned increases in dividend taxation. Labour’s shadow Treasury minister Rob Marris MP also supported our concerns which led to a very useful exchange in the committee.

Our concerns over how lower-earning company directors will be hit by the changes were well made (view the full debate). I’m glad the concerns got a further airing and I’m sure this won’t be the last time they are raised.

The Government continues to argue that, overall, these changes are a simplification with the costs offset by other tax cuts. We disagree, as many of the tax cuts or allowances do not apply to micro-businesses. The debate continues.

Impact on micro-business policy

There is a broader issue, which we have also raised, over how the impact of any such policies are considered by Government before being announced. It became clear to us that while broad macro-economic impacts were considered, how different sizes and ages of business might be affected was not an explicit consideration.

So the needs of a very small, early stage business which could really suffer from the smallest shift in tax policy were no more considered than those of any other kinds of firm.

As Roger Mullin MP (SNP) said:

“According to research that has been done by accountancy companies such as Crunch, there will be harm, or potential disbenefits, to some people who get very modest incomes indeed from running very small businesses.

“We want to ensure that, in encouraging proper taxation and an entrepreneurial climate, we do not unwittingly, through unintended consequences, put at hazard very new microbusinesses that are earning very modest sums of money indeed.”

Rob Marris MP (Labour) pitched in on this point too:

“There is a broader point here, to which the [House of Commons] Library research helpfully draws attention, about changes in the way the Government release information about the distributional analysis of impacts of Budgets.

“For this Chancellor’s first Budget in June 2010, the coalition Government published the distribution analysis of its projected impact. That approach from the Treasury has changed. There is a new analytical framework that uses different metrics, which is troubling because it discloses less information than the old methodology.”

The minister David Gauke MP (Conservative) responded to these points (emphasis added):

“I was asked why we have not undertaken a full assessment of the impact on owners of microbusinesses. I would just point out HMRC does not have ready access to data on owners of microbusinesses as a specific group of firms to enable a separate assessment for this group in advance of the measure taking effect. However, the Government have considered the general economic impact of the changes.”

So despite official government statistics having long reported micro-businesses as a separate business sector we have confirmation that a lack of data is a problem. This is leading to policy decisions being taken without their full implications being modelled or understood. Business groups, like Crunch Chorus, are always happy to offer help with their member data, but Government needs more than that.

We cannot allow Government to continue in a way that the 5.2 million UK micro-businesses can become accidental roadkill in the policy-making process. Our hope is that MPs across all parties will agree that, no matter their differences on tax policy, getting better data is a priority they can unite on.

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Written by Jason Kitcat

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