Before introducing costly new schemes government should first do less harm
LET’S face it. In asking for government favours entrepreneurs are a vested interest like all the rest. Because they aren’t collectivised in the same way as more experienced lobbyists, they don’t get the same hearing as big business. Yet what they lack in voice they make up for in value for money. Politicians are more than happy to throw a few million here or there for the good publicity that comes with claiming to stimulate new businesses.
This isn’t to say that the government shouldn’t help entrepreneurs. As Deloitte’s Debbie Griffiths argues (below), there are plenty of tax breaks that are making a real difference. As the American economist Milton Friedman said: “I am favour of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.”
However, there are plenty of bad ideas for stimulating more start-ups out there. Governments backstopping lending to businesses is highly questionable. That the private sector isn’t willing to shoulder the loans suggests that it’s probably not worth the risk. Also, there is a positive correlation between the degree of risk and how potentially disruptive an start-up can be – understandably, a government will want to limit the danger of throwing money at bad ideas, but this also risks disordering the priorities of the entrepreneurial process.
Yet the government is already throwing money at young people to encourage them to go to university. Perhaps there is something to be said in being equally indiscriminate with loans to young people starting businesses. It would be a more level playing field.
In any case, most of the suggestions in the entrepreneurs’ Budget (right) are for the government to stop doing things. A classic example of this outside of the Budget will play out when the Department for Culture, Media and Sport publishes its Green paper on the Communications Bill at around the same time. It’s widely expected to be packed full of policies that will bring a wrecking ball to the spontaneous tech start-ups of Silicon roundabout (appropriated by the government as Tech City). Blocking websites and the forced promotion of licensed websites by search engines are just two of the policies that could undermine disruption. Primum non nocere – first, do no harm – should be the chancellor’s mantra.
[email protected]
Twitter: @Philip_Salter