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Doug Richards has fired me up with his post on the
requirements for massive societal change to create a culture of
entrepreneurialism in the UK. It comes on the day that the UK will be told when
it is to go to the polls for the most important election in 30 years. And it is
time for me to get off the fence.
Tony Blair and Gordon Brown paid clever lip services to the
entrepreneur. They launched a cloud of buzzing, brightly coloured initiatives
to support small businesses. From the Technology Standards Board, to NESTA, to
Gordon’s own ‘Regional Development Funds’, they made a lot of fuss and noise.
Sadly, it was all rather badly co-ordinated, with no follow through and even
less real economic value. Funds were diverted to pork barrel projects (as any
political finance always is) and thousands of mid-rank civil servants were able
to re-launch their careers and improve their fully funded final salary pension
None of that really matters, and pretty well none of it will
prove to have had any lasting impact, in say, 10 years.
What does matter is the underlying major forces that the
Labour government set in motion.
A relentless increase
in personal and business taxation. The top rate of tax for a successful
entrepreneur in the UK has risen dramatically. Nil rate bands have increased
below the rate of inflation, National Insurance has risen, and upper rates have
risen hugely. (I regard NI as a major disincentive for entrepreneurs, it is
regressive and very expensive to administer. Its two purposes are to accelerate
cash flow for the Treasury and conceal the true rate of personal tax). Tax
relief for capital gains has been restricted and cut back. Tax relief for
investors has been restricted and cut back. Several dozen new ‘small taxes’
have been added to all aspects of business life, especially in terms of travel
All of that goes to make successful
entrepreneurs start in other places or relocate there immediately they become
A relentless increase
in bureaucracy. Back in 2004, my accountant pointed out to me that I was
spending £25,000 a year maintaining systems for the administration of NI, PAYE,
VAT, EU Statistics, Health and Safety, Equality. None of those benefited our
software business in any way. We had 21 employees, turning over about £2m, so
that was a 2.5% additional ‘tax’ on the business and one lost programmer or
artist we really needed. The situation is far worse now, with even tiny
companies needing one FTE just to fill in paperwork and returns for the State.
‘Box ticking’ has become the obsession under this Government, with no thought
as to the costs placed on those who are trying to work.
All of that goes to demoralise, confuse and
displace effort that could have made a great business work
A relentless trend to
‘risk avoidance’ instead of ‘risk management’. The trend is to say ‘no, it
is too risky’, rather than ‘ok, how can we make this risk statistically
acceptable?’. Health and safety, food safety, labelling, certificates for
everything, and a deep seated Government tendency to sit on its hands and do
nothing, has been pushed into schools and has rubbed off on a generation of
young people who have been taught that everything is far too dangerous to even
think about attempting it. Hardly the legacy one expected in the country of
Shackleton, Darwin, Montgomery, Fiennes and even Eddy Izzard!
All of that has eroded the cultural imperative
to entrepreneurialism and adventuring.
A trend to
‘anti-elitism’ and the ‘politics of envy’. This is a horrible, corrosive
feature of a particular political class. That class is happy to send its
children to elite schools and give them preferred access to resources, while
consistently denying that there is any value in, what it calls, an ‘elite’ and
shutting down routes to social advancement. I have first hand experience of the
way in which this has ‘taught’ young people not to even want to try to do
better. ‘Settle for being working class, and be proud’ has been the toxic
rallying cry for over a decade.
All of that has reduced the pool of those who
special pleading (construction and finance). Labour needed cash to fund its expansion of the state. Debt
provided that. In order to get debt up, and to tax the spending on that debt,
Labour greatly encouraged a property bubble and a lending bubble. We know that
construction and banks were happy to play along, and take their bonuses. We
also know it lead to a $2tn world-wide collapse, in which the UK took a huge
blow. However, the Government had achieved its objectives of funding the
expansion of the State, and was quite happy to pick up the pieces (buy banks)
and pass the bill to the next generation for settlement. The point is, the
bubble was not an accident, but a clearly foreseeable consequence of a state
that was built on debt.
All of that will suck cash out of business and
personal savings for a generation. Families won’t be able to support small
business, friends will be unable to support friends and the air of
entrepreneurialism will be thinner.
A trend to support
vanity projects instead of real benefits. Road expansion gets votes, but
does not help C21 business. The awful Digital Economy Bill gets political
favours from media owners, but will cripple new businesses in the UK. Ten years
of talking about Digital Britain has not even started rolling out the digital
backbone that we need for the C21 competitive wars to come. A trend to social
skills and soft degrees that enabled ‘50% of school leavers to be at University’
has created millions of people who can hold a video camera, write about
deconstructionism, or explain the history of the proletariat, but far fewer world
class mathematicians, engineers, designers, and sales people than the UK needed
and will need. Worse, it sent people to do pointless degrees, run up personal
debt and then drop out, when those people could have ‘done a Branson’ and
started businesses at 17 that might have worked through sheer hard work and
All of that vanity has displaced effort that
could have driven our economy forwards.
A ridiculous bloating
of the machinery of the State. More than double the size of 1995. A huge,
dead, festering heap of unproductive and unnecessary ‘non-jobs’ that monitor,
control and fuss about nothing important. No business needs or asks for it, and
the State just sits there, slowing down the flow of money and diverting talent
and resources to unproductive ends. This was the prime aim of a decade of
Government: to increase its electoral base by simply paying them money in made
up jobs, jobs that every other party would cut, and therefore the bloated state
employees would vote Labour forever.
Salaries for the public sector now match or exceed the private sector
for ‘same role’ comparisons, and pensions for public sector employees massively
exceed the private sector. The very best people therefore move into
unproductive, but well paid, roles in the State and act to stop business
growing instead of helping.
Even worse, a huge bloating of the payments to ‘non-working’
people from £60bn in 1995 to £105bn in 2011. Again, money paid to people ‘not
to work’, but which is mainly designed to encourage them to think kindly of the
people who pay them. Add to that the huge referred subsidies to the
‘gerrymandered’ mini-states of Scotland and Wales, and the voting pattern of
the UK can be mapped clearly against who gets paid by the State.
All of that is unsustainable, toxic and acts as
a massive drag on growth and entrepreneurialism.
The sad thing is that I have no idea how to change that
without massive social upheaval.
Do you? If you do, I for one, will vote for you.