Former Secretary of State for Business and Trade, Kemi Badenoch, has clinched the Tory leadership vote.

Badenoch was up against the former Secretary of State for Housing, Communities and Local Government, Robert Jenrick. Voting closed on October 31, with Badenoch being the favourite to win.

Small Business asks the new Tory leader what she would like to see for small firms.

Small businesses face many challenges, and one of the biggest is business rates – would you look at reforming them?

Badenoch: Business rates currently have a patchwork of reliefs and exemptions attached to them which can be complex and arbitrary. I would certainly support reforms to make the system more straightforward and fairer.  

What about taxes on small businesses in general?

Badenoch: Taxes are too high in this country. This discourages aspiration and entrepreneurship as well as contributing to our issues with low productivity growth and economic inactivity.

This is part of the reason I have said we need a systematic rethink of the relationship between the citizen and the state. The government is trying to do too much and is often not doing it well but still taking an ever greater share of GDP. If we are going to cut taxes, as I think we must, we need to rebalance this, so that the state does the things we depend on it for well. Free enterprise and growth will then bring improvements in living standards.

Freeing small businesses from complex taxes and disproportionate regulations will be a vital part of that. The last Conservative government raised the VAT threshold to take some SMEs out of VAT, and as Business and Trade Secretary I was pushing the Chancellor to go even further on this. The reality is the VAT system is even worse than business rates for complexity and burdensome administration so I would like to see a root and branch review to simplify it – and ultimately cut rates too – to benefit consumers and all those small businesses whose purchases attract VAT. 

Alongside that, would you look at changing funding and other government support for SMEs to help them grow?

Badenoch: The best support that governments can give to small businesses is the removal of the barriers that hold them back, such as taxes and regulations, access to finance and the unavailability of the skilled workers they need. As Business and Trade Secretary, I led the Smarter Regulation Programme that included reforms to the Working Time Regulations to remove pointless record keeping burdens, saving employers billions.

There was much more to be done – unfortunately the Labour government is going into reverse: its Employment Rights Bill will cost firms billions, and small businesses will be hardest hit. If I am elected as Leader of the Conservative Party, I will champion the cause of small businesses and entrepreneurs and hold Labour to account for policies that will damage them.

I have been calling for a long time for reform of higher and further education, to ensure that school leavers are not encouraged into degrees at less well regarded universities where they will incur serious debt, for no improvement in their career potential. Small businesses would benefit from being able to hire and train enthusiastic young people, increasing the practical skills across the workforce. 

Similarly, we have far too many working age adults who are either receiving benefits or opting out of work entirely – we need to address the incentive structures that have brought us here as this is a terrible waste of potential and these people should not be written off while we rely on immigrant workers. 

There are many opportunities for doing business around the world, but the barriers are often difficult for SMEs to overcome – what help would you provide with that, for instance, with importing and exporting?

Badenoch: While this is undoubtedly true, we also shouldn’t overstate the difficulties. The UK has many highly successful small businesses of all kinds engaged in international trade. 130,000 export to the US alone. 

One of my proudest achievements as Trade Secretary was completing the UK’s accession to the CPTPP – the biggest and fastest growing free trade area in the world. The CPTPP agreement includes a chapter dedicated to ensuring SMEs can access the benefits of the agreement. It also includes world leading provisions on services and e-commerce, areas where our SMEs have great comparative advantage.

In my time at the Department of Business and Trade we ran a number of popular support services for SMEs  to start exporting. Another programme in the Department of Business and Trade that I was excited about was the trade digitisation work. Simplifying trade formalities to make importing and exporting more accessible and lower risk for small businesses could be transformative and I’ll be keeping a close eye on the government to make sure they continue to support these programmes.

As well as small businesses, many of our readers are sole traders and freelancers. What steps will you take to make sure they’re not forgotten?

Badenoch: Sole traders and freelancers make vital contributions across our economy. Flexibility for clients and service providers and innovative ways of doing business should be valued and protected. Our tax and regulatory systems need to reflect this and I’ll be challenging Labour hard to ensure that their workers rights reforms don’t end up disadvantaging small businesses both in their capacity as employers and as freelance contractors and service providers.

Artificial intelligence has the potential to revolutionise how small businesses work – how will you foster adoption of AI to make sure they can seize those benefits?

Badenoch: AI adoption and digitisation in general will be key to productivity growth, in the public and private sectors. For SMEs, this may mean investments that seem daunting. The government should ensure that the sector is competitive and that innovative and accessible products are not regulated out of reach. 

Under the Conservative government, we took a pragmatic view of AI, and did not succumb to reflexive calls for specific regulation, like the EU’s AI Act. Prescriptive regulations hold back innovation and prevent the benefits of new technology reaching SMEs and consumers. Labour believes in greater regulation. 

And lastly, do you have a personal favourite small business? Maybe a hidden constituency gem?

Badenoch: I love so many of the small businesses in North West Essex, from local independent high street shops to life science businesses. Rather than singling any of them out, I will ask everyone reading this to try and support small businesses by buying at least one Christmas present this year from a local independent shop! I certainly will!

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