HR · 12 October 2015

Vince Cable warns small firms in the North East will be put out of business because of the national living wage

The former business secretary was one of the biggest Liberal Democrat casualties in the May general election
The former business secretary was one of the biggest Liberal Democrat casualties in the May general election

Former business secretary Vince Cable has warned that small firms in the North East could be hit particularly hard by the government’s incoming national living wage.

He said the impact on the region as a whole, following what is meant to be a boost for low-paid workers, will be “exceptionally negative”. Businesses on the smaller scale will find it difficult to pay the higher rate, while the effect of tax credits disappearing for some 148,000 low-income families, means there could be a double hit. The benefit cut alone could take £300m out of the regional economy.

“Low-income households are usually supported through tax credits but what is happening under the Osborne initiative is low-income families are going to lose money. The impact will be particularly felt in sectors like care and retail,” he warned.

When it came to the national living wage, Cable admitted he was “very worried” about what George Osborne was doing. “It got him a good headline on the day, but it could do an awful lot of economic damage.”

He felt “much happier” with the older model used in the coalition and under the Labour government, with minimum wage set by the Low Pay Commission.

While Osborne has repeated his aims to bring about a “Northern Powerhouse” and redistribute the balance of the UK economy, recent news has shown London is still dominant in many respects, with the economic gap between the capital and the North of England set to grow.

While 89,000 new businesses were created this year, nearly a fifth of those were in London – more than the total number of firms in Scotland, Northern Ireland, Wales and the North East of England combined.

Cable said the current situation meant the North East wouldn’t be “fertile ground for the Conservatives” for a while, as the “rhetoric is far ahead of what is actually being delivered”.

“The effect of the national living wage on the North East will also be exceptionally negative because a lot of small firms that are just about surviving will be put out of business.”

“I’m glad to hear them talking about the North of England but I expect there isn’t an enormous amount of substance behind it,” he added. “We’ve seen the electrification of the TransPennine line across the North paused and I haven’t seen anything that shows a great deal of commitment.”

To better make use of the North East’s potential, Cable added that more of a focus needs to be concentrated on its status as a strong UK exporter. “It exports more than any other region. If we are going to be successful in manufacturing and exports, then the North East has to flourish.”

The former Twickenham MP lost his seat, which he had held since 1997, in the last general election. Prior to that, he had made some positive introductions to the business landscape during his tenure as business secretary. One of the most notable was his formation of the British Business Bank, bringing together all of the government’s business finance initiatives – from the Angel CoFund to StartUp Loans – under one roof.

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ABOUT THE EXPERT

Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.

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