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
Interesting article, Joe.
Anything “aimed at developing a base of budding entrepreneurs” would be a truly revolutionary innovation. I have been struck recently by how much our system of state education is designed to prepare and condition young people to go out and get a job, working for somebody else, for a salary. We simply do not instil in young people the idea that they can work for themselves or set up their own companies. This may explain why Britain has a surprisingly low level of entrepreneurship compared to our neighbours (the Germans and the Italians have far more, and more successful, SMEs for example).
Whether “upwardly mobile, aspirational self-starters” would in fact be “a natural constituency for a dynamic Liberal Democrat party” is less clear, however. Much of the Liberal Democrat policy platform is driven by a membership which (I suspect) is largely employed and, more significantly, largely employed in the State sector. I have lost track of the number of times I have heard Lib Dems talk about profit as though it was a dirty word; an immoral concept. That’s hardly going to be attractive to the self employed and those setting up small businesses.
On your specific points:
1) I agree. It makes no sense that a person can stay in school and to academic A levels for free, but has to pay if they study a vocation course outside formal education. A better approach might be to scrap school-style “free” further education and replace it (as Vince suggested) with a portable sum of money that can be used to finance any post-16 education or training.
2) Apprenticeships are a bit more tricky. Government is appallingly bad at running them – when government funds apprenticeships, they become subsidised employment schemes rather than on-the-job learning. Apprenticeships need to be negotiated between the apprentice and the “master”. Our work-experience approach to apprenticeships bears no resemblance to the (very successful) German apprenticeships. More information is available in a report by Professor Alison Wolf. I’d also caution against trying to guess from the centre what apprenticeships are needed (“Particularly energy conservation areas such as…”). Apprenticeships are a form of entrepreneurship – they are a discovery process.
5 & 6) “A guaranteed minimum income…”: You’d not be the first Lib Dem to propose what others call a “Citizen’s Income”. Another approach would be to replace the whole benefits scheme with a “Negative Income Tax”, so that those whose income is below the threshold get 20p in the £ back. It’s simpler, fairer and it avoids the penal withdrawal rates that strike those who are on benefits and move into work. The only question is, why restrict it to 18 to 30 year olds?
“The program can be paid for by … Withdrawal of capital gains tax allowances and increasing the rate for higher-earners from 28% to 36%…” I feel that this might, again, undermine our appeal with those “upwardly mobile, aspirational self-starters”.
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
I applaud the intention behind this post but on the specifics doubt that they are what is needed. For example:
1) Not all entrepreneurship is of equal value. What we really need are tech businesses that have – or will soon grow to have – global outreach potential like the German ‘Mittelstand’ and in a few cases grow into the really big companies of the future (and hence earn a living for UK PLC). This is very different from boiler maintenance engineers and the like. Is there any evidence that these jobs are badly undersupplied? The mounds of junk mail that land on my doormat every morning suggest not. I fear that a stream govt subsidised new entrants would only harm etablished businesses and do little for UK PLC. In fact I have already heard this complaint from tradesmen (interestingly theeir complaint was less about the competition and much more about the poor standards that they had to sort out for ripped-off customers). I fear that schemes done primarily to push job creation probably finish up with dreadful standards while schemes done to improve standards would improve job creation.
2) Various age restrictions. If it makes sense for someone to train in a job why should that cease to be so for someone that happens to be just slightly older? In practice most will be in their late teens but there will be others thrown out of work by company closures and/or technology change who have just as great a need – and possibly greater. Then there are those who didn’t find the right niche aged 16 or so but only rather later. Why should they be excluded?
3) The assumption is that this is a welfarelike actvity with an associated cost that govt must bear – and somehow find the budget for. (This of course is one reason for the age restrictions – restricting entitlement is a simple way to cut costs). But why? Surely, the point of any vocational training is that it yields a return to the subject in higher earnings and/or job satisfaction. And if it does so then it is an investment that should be limited only by marginal return and should not have an arbitrary govt-imposed cash limit. Any govt spending of a well designd scheme will come back to it in higher taxes, less unemployment etc.
4) So, in conclusion I suggest that what we need is a system that puts control in the hands of those at the coal face – and that means in practice candidate apprentices etc. and their would-be employers whether they are large multinationals or one-man-band plumbing firms. Sure, money needs to be involved and the govt will have to do some pump priming but in a well designed system – which we are some way away from – this would happen according to the perceived advantaged of those actually involved and not some Whitehall mandarin.
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.
Yes, Alison Wolf is very good. Every politician should have Philip Booth’s Forward to that report, and particularly the first paragraph branded on their forehead. The system we have is pure Soviet – e.g. “[During the 2001 general election campaign] the UK political parties were behaving like the old Soviet masters who would proclaim that there were ‘thousands more tractors’ while the people were malnourished. … it did not even cross the minds of the major political parties that policy on health, education and so on should be oriented towards consumer satisfaction rather than the maximisation of inputs.
In other words we have ‘producer push’ and not ‘consumer pull’ policies. These are horribly expensive and fail nation and people just as badly as they did in the Soviet Union. So much for all the bold words about ‘putting people first’ and so on – total BS of course at the national level which voters worked out long ago.