On Monday, Liz Truss has been announced as new Prime Minister, beating her rival, Rishi Sunak, with 57% of the votes.
While it has been expected, given the results of several polls, Liz Truss has been announced as the new leader of the Conservative Party and Prime Minister, but she has beaten her rival, Rishi Sunak, by only a small margin, getting 57% of the final vote.
From the get-go, the new PM is facing tough decisions to get the country through this crisis. Soaring energy prices, a cost-of-living crisis, rising inflation and a predicted recession all need to be addressed urgently.
Millions of households and small businesses will depend on how Ms Truss will deal with these issues. The question is, will she step in to help?
What Liz Truss Has Said During Her Campaign
While Ms Truss has said that she would help households and businesses with soaring energy bills and the cost-of-living crisis, she has not produced a detailed plan.
However, she has made bold policy statements that she said would help small businesses and boost the economy.
Apart from reversing the rise in National Insurance Contribution, that her rival Rishi Sunak has brought in when he was Chancellor, she also pledged to abandon the rise in corporation tax, which Mr Sunak has announced.
Even more boldly, she suggested that she is considering lowering VAT by a whopping 15% to 5%. She said she was also considering raising the personal allowance for income tax, increasing the threshold of when people pay income tax.
While this might sound like good news for small businesses at first glance, not all proposed measures will help small businesses. Some will mostly profit big businesses who make large profits.
Although tax cuts seem supportive for small businesses at first glance, reversing the corporation tax hike only really benefits high-profit businesses and increases competition as taxes don’t reflect the disparities in earnings.
Lee Murphy, Founder of Accountancy Partnership
The new Prime Minister has also said, during her campaign, that she wants to review business rates and overhaul the system.
In terms of the cost-of-living crisis and soaring energy costs, Liz Truss has been less concrete. However, she did emphasise that help would come.
While initially she has announced that she was against “handouts”, such as the £400 energy bill support for everyone introduced by Rishi Sunak, she did later say she is considering all options.
For small businesses it’s important how the new Prime Minister deals with the cost-of-living crisis, because consumers will cut on spending if their budgets are squeezed too much.
Ms Truss has advocated for higher interest rates to get inflation under control and has called on the Bank of England (BoE) to do more.
Her support for hard hit households with energy bills is to cut taxes, which according to her would put more money back into people’s pockets.
Is A Freeze On Energy Bills On The Cards?
While nothing has been officially confirmed, several news outlets, such as Sky News and BBC, have reported that Ms Truss is considering freezing energy prices.
This has been called for by opposition parties as well as industry bodies and would be welcomed by millions of households who are worried about struggling to keep warm this winter.
Although the plan to tackle soaring energy prices will only be announced on Thursday, reports have said that the freeze would be on wholesale gas costs.
This would mean that not only households but also businesses, who do are not covered by the energy price cap, will benefit. Essentially, this government-imposed price freeze would replace the cap.
Crucially, the freeze would happen before the energy price cap is due to go up in October. So households will pay current levels of energy prices. It is not yet known for how long this freeze will be in place, but it has been suggested that the price guarantee will stay around potentially until the next election in 2024.
While many small businesses have already seen their energy costs rising by considerable amounts, it is understood that the package that will be announced on Thursday will include additional help to cope with these rises for small businesses.
How this price is paid for is not yet clear. There are two options on the table. One is to borrow more to pay for this. The other is for consumers to pay the money back over several years through their bills.
The second option could potentially mean that consumers will have to pay higher bills for decades.
While we have some indications of what kind of PM Liz Truss will be, whether she is good news for small businesses will remain to be seen. But one thing is certain, if no decisive actions are taken, many small businesses will struggle.
The challenge now is to deliver action that is big and bold enough to match the scale of the crisis threatening the existence of many small firms, and the jobs, livelihoods and communities which depend upon them.
Martin McTague, National Chair of the Federation of Small Businesses
