Extending the LibDem youth contract to self-employment

Small and medium sized businesses account for 51% of turnover and 55% of employment (DTI figures). They primarily employ UK based staff and pay full UK tax on the value generated here.

Equipping young people with the training and skills for self-employment has the advantage of developing a more flexible and resilient workforce, better able to adjust to a fast changing economy, as well as enlarging the pool of entrepreneurs capable of starting and growing small business concerns.

An enhanced Liberal Democrat youth contract aimed at developing a base of budding entrepreneurs, would establish a core of upwardly mobile, aspirational self-starters, a natural constituency for a dynamic Liberal Democrat party and a bedrock of support for coalition government – the future for British Politics.

An enhanced program may feature:

  • Offering school-leavers an option of state funded vocational training from 16-18 for self-employment with a focus on self-employed trades and maintenance of mechanical, electrical and IT equipment.
  • Fully subsidised apprenticeships in manufacturing and construction services (Particularly energy conservation areas such as efficient boilers, home and office insulation, solar panel installation, domestic wind turbines and underground heating, at the minimum wage of £2.60 per hour, could be made available to 16-18 year olds and travel expense reimbursements for home to work travel expenses paid free of tax.
  • Apprenticeships/in-work training on minimum training pay in the public sector (adding to the current private sector only offer), self-employment start-up grants and initial mentoring support upon completion of a short business-training course made available to all 18-24 year olds.
  • Extending to all 18-30 year old graduates an offer, subject to availability, of either work placements/internships upon graduation in the public (as well as the existing private sector offer to 18-24 year olds) or a grant upon completion of a short business-training course for setting-up a self-employed business.
  • A combined tax return/minimum income claim filed annually by all 18-30 year old participants in the program.
  • A guaranteed minimum income, in place of the current unemployment benefit, paid direct to the self-employed and temporarily unemployed (up to six months), by way of a tax credit payable monthly for the first six months or via the real-time PAYE system for employees of registered employers’. Those not self-employed or in training for more than six months would revert to the JSA.

The program can be paid for by a more effective allocation of existing tax subsidies. Withdrawal of capital gains tax allowances and increasing the rate for higher-earners from 28% to 36%, to bring it in line with the reduction available to basic rate taxpayers, could bring in £1 billion or more. Another billion could be released by discontinuing tax breaks on company share option plans, share incentive schemes, venture capital trust relief and enterprise investment schemes. Tripling the current £1 billion of funding for the youth contract should enable a increase in participation from the current 410,000 to 1 million plus.

* Joe Bourke is an accountant and university lecturer, Chair of ALTER, and Chair of Hounslow Liberal Democrats.

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7 Comments

  • Richard Dean 12th Mar '12 - 3:45pm

    Why not teach “How to be an entrepreneur” at school? Even have an exam or qualification in it? Things to be taught might include:

    how to have an idea; finding a niche,
    not being timid, and not being self-deceptive or over-confident;
    where to find assistance;
    supply chains; using them, being part of one
    how to handle bureaucracy,
    finance; banks, venture capital, risk
    how to be self-employed; how to set up a limited company; etc.
    importing and exporting
    health and safety at work

  • Tom,

    Thanks for your astute comments and the link to the report by Professor Wolf. I will read that with interest.

    I can’t disagree with your assessment of government run apprenticeship schemes or the pitfalls of trying to guess from the centre what apprenticeships are needed. I did, however, find myself pretty much agreeing with the more interventionist approach to industrial strategy, outlined by Vince Cable in his leaked letter Vince Cable Letter

    I am one of those Libdem’s to support the introduction of a “Citizens Income” exactly along the lines you have outlined of replacing the whole benefits scheme with a negative income tax for the reasons you have stated. I have posted on the proposal recentlyTax and Benefit Reform

    In these days of austerity, the question of ‘How will you pay for it?’ always has to be answered. If we have a personal allowance of £10,000, can we justify keeping a separate and additional allowance of £10,600 for capital gains? A basic rate taxpayer pays 18% on capital gains i.e. a 10% reduction against the 20% rate of tax he pays on income. A higher rate taxpayer pays 28% on capital gains i.e. a 30% or 44% reduction against the 40% or 50% he pays on other income. In this brave new world that we live in, it was Norman Lamont who brought rates of capital gains tax in line with income tax and Gordon Brown who separated them again!

  • Richard,

    A good suggestion. The current Business Studies option seems to be quite a popular GCSE course. A parallel course along the lines you have outlined might be attractive to those with a mind to run their own business in the future.

  • Liberal Eye,

    Valid points and your conclusion gels with the thrust of the Report by Professor Wolf referenced by Tom Papworth.

    I do feel however that Youth unemployment is of such a serious and long term nature that we need to address meaningful resources to the problem and to do so urgently. There was a report over the weekend that unemployment levels amoung young black males in the UK had reached 55%, Young black men unemployed worse than Greek or Spanish levels of youth unemployment. That is not a situtation that we can leave unaddressed while we search for better, more comprehensive long term solutions.

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