Chris Philp: Business (not government) can deliver new, real jobs – and with it prosperity and social justice for the nation

Chris Philp is an entrepreneur who floated his first business (a distribution company) on the stock market when he was 29. He was the Conservative candidate in Hampstead & Kilburn at the general election and came within 42 votes of winning.

George Osborne’s Spending Review is an essential step towards putting the national finances back in order. It deserves our full support.

The Government’s biggest challenge now is to ensure private sector jobs are created - to replace those lost in the public sector, and to provide work for those on benefits. The best way to fight poverty is by creating real jobs, so everyone in society has an opportunity to do well for themselves and their families. Creating real jobs is a far more potent weapon against poverty and inequality than Labour’s approach – which is simply to hand out borrowed cash.

Of course, the Government can’t create jobs. Business does. But the Government should create the conditions for growth. The beneficiaries of this will not simply be business owners. It will be our nation as a whole. The profits business generates are taxed, and pay for doctors, nurses and police. They help reduce our deficit. Jobs created will help the 5 million on out-of-work benefits back into work. Creating new jobs enables social justice.

Ironically, the Labour Party thinks that over-taxing businesses and wealth creators helps the poor. In fact, it does the reverse. It destroys British jobs and makes more people poor.  To deliver real social justice, we must make the UK the most business-friendly country in Europe.

After 13 years of Labour Government, this is very far from true. A CBI survey earlier this week showed that business leaders thought that the UK had got much less competitive over the last 10 years. The principal causes of this were (in order):

1. High rates of personal tax
2. Excessive regulation
3. High rates of business tax

Consequently, a whole raft of companies have recently left. Pharmaceutical giant Shire. Publisher Informa. Advertising conglomerate WPP. Even the plumbing Group Wolseley has moved its domicile to Switzerland, saving them £23m per year in corporation tax. Wolseley’s move alone leaves the UK Government around £115m out of pocket – meaning you and I must pay more tax, or the cuts must go deeper than otherwise.

Smaller companies are leaving too.  Last year, the Telegraph reported that Altis, a £1bn hedge fund with 35 staff, has relocated leaving only a small presence in London. Partner Stephen Hedgecock said, “The UK model is broken. It's not just the 50 per cent rate – it's National Insurance, the treatment of pensions... everything. It's just a ridiculous amount of taxation."

It would be easy to say that Altis are just a few rich hedge fund guys. But their departure will deprive the Government of millions in tax revenue (about £10 million by my reckoning). And let’s not forget what economists call the multiplier effect – Altis engaged external accountants and lawyers in London. Now they will be hired elsewhere. And the money that Altis’s staff spend on restaurants, clothes, housing and in shops will now be spent in another City.

Gordon Brown’s 50% tax band may therefore end up losing tax revenue. Next April, the Government should review the tax receipts for the current financial year, and if the 50% rate has only a small or even negative impact on the total amount of tax raised, it should be scrapped. In the short term, this makes for bad politics. Ed Milliband would speak of nothing else at PMQs for months. But in the long run, it will create jobs. And that is how the Government will ultimately be judged.

Luckily, in David Cameron and George Osborne we at last have leaders who recognise the long-term importance of these issues. They have already taken clear action: future reductions in corporation tax; freezing employer’s national insurance contributions; investment in infrastructure like Crossrail; Lord Young’s work reducing regulation; and maintaining spending on Science research.

But there is still more to do. Many employers complain about the burdens imposed by employment law. I have run businesses for the last ten years, and I agree. It is often nigh on impossible to sack someone (short of blatant gross misconduct). This makes firms reticent to hire. At present, much employment legislation does not apply in the first year of employment. Let’s make this three years for large companies, and indefinitely for companies with less than 100 staff. Tribunals themselves need to use more common sense. This will all encourage firms to hire more readily.

Finally, we must create an atmosphere encouraging entrepreneurship – where setting up or running a business is seen as a good thing. My first company was a distribution business. You may not think this very glamorous – and when I started out driving the first delivery van myself, maybe it wasn’t. But we grew it to nearly £100 million of sales in four years and it created jobs.

We must encourage the next generation to think about business and entrepreneurship and exciting and important. In the US, becoming an entrepreneur is an aspiration in a way it simply isn’t here. To address this in a small way, I set up a “Dragon’s Den” type project to get youngsters in Kilburn to come up with business plans. I am now extending the programme.

The years ahead will be tough. After Labour’s shameful failures, it is fortunate the new Government understands that freeing businesses to create jobs is good for the economy, good for public finances and good for social justice.