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Your Voice - Cost of living v cost of doing business

Anyone who reads the Sunday papers, tunes into Prime Minister’s Questions or just follows the news more generally can’t have missed the current political emphasis on the costs of living. 
With the economy getting stronger the focus in the Commons has switched from whether the Government has pushed us into recovery (the now accepted case) into whether this is a recovery that can benefit everyone.
For many politicians, the ‘everyone’ is very much focused on individuals – the so-called ‘cost of living crisis’. With the Autumn Statement fast approaching (a sort of mid-term report with a few new policies thrown in) there is a clamour to take actions that reduce, among others, energy bills, national insurance and fuel duty, and raise the thresholds of stamp tax, individual tax allowances and wages.

The Forum of Private Business is worried that one of the hidden impacts about decreasing the cost of living is the flip side, to some extent a need to increase the cost of doing business. We are therefore focused on encouraging Government to take actions that benefit businesses too.

So what do we mean by the cost of living impacting on the cost of doing business? Take the following examples:
1. If Government encourages councils to freeze or cap Council Tax, what impact will that have on business rates? In recent times we have seen average council tax increases of 0.1% (2011-12), 0.4% (2012-13), and an expected increase of less than 2% again for the next two years. Compare this to business rate rises of 4.6%, 5.6%, and an expected increase of 3.2% next year. It is true to say the Government has Small Business Rate Relief but overall, businesses are funding an ever greater percentage of council activity.

2. If politicians want to increase wages (the current so-called ‘Living Wage’ debate) then that would undoubtedly cause wage inflation across the rest of the business community. Equally, any changes over zero hour contracts would increase the costs of compliance for businesses. It is suggested that 3 in 4 people on a zero hours contract don’t want more hours. That means any legislation would be to the benefit of just 0.8% of the workforce. For small businesses, which tend to use these types of contracts responsibly, it simply can’t be worth the associated business cost increases.

3. Finally, take the expected rolling back of green tariffs. These must include business’ energy bills too. According to the BBC, the price of green levies on small businesses is already 15-21% higher at present than for domestic households and due to rise to 26% by 2020. 73% of our members feel that they will bear the brunt of any further increases in green taxation, with price rises not being proportionate with domestic usage.

These are some examples of how the two debates are intrinsically linked. With the overwhelming majority of our members experience cost increases this year – and expecting more next year – we are demonstrating to government the inherent problems of reducing the cost of living, if business costs are not also tackled.

Please do get in touch with the policy team if you want to contribute case studies or stories that will help shape our work in Parliament.  

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