Lord Flight: Don't let today's anti-business establishment freeze out tomorrow's entrepreneurs
Lord Flight was Shadow Chief Secretary to the Treasury from 2001-2004 and led for the Opposition on the FSMA. He is now chairman of Flight & Partners Recovery Fund.
One of the biggest achievements of the Thatcher Government was the encouragement of and revival of entrepreneurship, and delivering the venture capital finance to support it – for which Lord Young should take much of the credit. This Government has similarly sought to encourage entrepreneurship. The improvements to the EIS Scheme in terms of enlarging the size of companies which qualify has been particularly helpful, essentially as it supports new businesses which have survived, need more resources to grow and are more likely to succeed.
The Government has sensibly supported Capital Gains Tax Entrepreneurs’ Relief and it is to be hoped that measures will not be introduced to reduce this. The Government has also started to address the all important area of public sector business contracts for smaller companies where, historically, both internal guidelines and the complexities of EU tendering requirements have shut out small businesses. This is particularly important with regard to the NHS, where much innovation is coming through from small businesses. Albeit in part the result of a difficult economic climate and shortage of jobs for young people, it is extremely heartening to see a large increase in the number of young people considering being entrepreneurs.
An unsympathetic approach to business failure is embodied in the suggestion that company liquidators should be given the power to “sell on” the civil action liabilities of directors following a company failure. This raises the spectre of directors being pursued for their possessions by debt collectors. While directors need to be held to account, it is crucial that the balance struck is pro-entrepreneurship. All new enterprises involve substantial risk and in the UK the failure rate has been high. If an excessive portion of risk is loaded on to entrepreneurs and directors then, as night follows day, this will end up discouraging entrepreneurship. The risks in taking on the role of being a director are already large; for small and medium size enterprises with a high risk of failure it is essential that potential financial sanctions resulting from business failure are not prohibitive.
Here there is also some conflict within Government policy. Its efforts as part of its growth strategy to encourage seasoned directors to participate in the boards of mid-size businesses are to be welcomed, but will be undone if, as a result, the Government’s new, proposed personal risks for directors render the risk/reward balance of participating in such Boards unattractive. It is interesting to note that no comparable disincentives are being proposed for Civil Servants whose policies fail, at major expense to the tax payer, – such as the £18bn written off on the failed Systems project for the NHS.
The UK needs a pro-entrepreneurship culture like that of the US and it is disappointing and unfortunate to see anti-entrepreneurship, Establishment prejudices creeping back in.