The Independent View: The Lib Dems can – and should – be the Party of the Entrepreneurs

Every party claims, in some way, to be on the side of small business, but none has really given new and potential businesses much time or attention. Firms that do not yet exist are much less easy to champion and harder still to help than existing small businesses, but they are no less important.

It may be no wonder, then, that not one of the three main party leaders mentioned entrepreneurs in their Autumn conference speeches. That’s why today we at the Adam Smith Institute are helping to launch The Entrepreneurs Network, a new think tank dedicated to giving entrepreneurs a voice in politics and public debate that is separate to established trade groups and sectoral interests.

The cause of entrepreneurs could be credibly taken up by any party. The Liberal Democrats have always prided themselves in speaking for the people as a whole, not a particular class group. Taking up the cause of the entrepreneur would be an admirable and worthwhile continuation of this tradition.

At this year’s Party Conference, Vince Cable spoke about “getting rid of the red tape which throttles small business and holds back entrepreneurs”. This is a good start, but Britain lags behind internationally in some key measures of running a small business. We do well in the World Bank’s Ease of Doing Business Index overall, in 7th place, but we are only 19th for setting up a business (that is, registering with Companies House and other regulatory authorities) and 21st for enforcing contracts. We are number one in the world for getting credit, but when it comes to unglamorous essentials like registering property and getting electricity, we are 73rd and 62nd worldwide respectively.

Many are rightly concerned that our economy is becoming dominated by a financial sector underwritten by ordinary workers and house price inflation in London and the South East. Reforms to address these issues are vital. Regulation that imposes fixed costs on firms (such as compliance costs and planning regulations) ends up favouring established big businesses, for whom the costs are a smaller chunk of their overall expenditure.

Fixing and improving regulations like these may not be glamorous, but could make a big difference. A Liberal Democrat party that went into the next election promising to reform regulations to make Britain number one in the World Bank’s rankings – an achievable goal – could make itself attractive both to voters concerned about the economy and to those who want less dominance by big, established firms.

Despite a disappointing weakening of resolve this year, the Liberal Democrats remain the most entrepreneur-friendly (and economy-friendly) party on immigration. As you might expect of people who’ve travelled halfway around the world in search of opportunity, immigrants are more entrepreneurial than average. A 2006 study by researchers at Berkeley University found that “50 per cent of Silicon Valley engineering and technology startups were founded by immigrants (as were 25 per cent of such startups nationwide).” By emphasising the new ideas and jobs created by entrepreneurial immigrants, the Liberal Democrats could finally take the other parties’ knee-jerk anti-immigration policies with a positive message.

The entrepreneur does not belong to the right, left or centre, nor to any ideology. But she does need a louder voice. In the months to come, The Entrepreneurs Network will work with entrepreneurs to encourage the kind of thinking and policy that entrepreneurs need if they – and Britain – are to flourish.

* Sam Bowman is Research Director at the Adam Smith Institute and was voted Liberal Voice of the Year 2013 by readers of LibDemVoice.

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8 Comments

  • “We are number one in the world for getting credit.” Really? That’s not the impression you get.

    And the link to the Ease of Doing Business Index is broken – try http//www.doingbusiness.org/data/exploreeconomies/united-kingdom/

  • Great piece, Sam. I think it’s key that the UK aim for the top spot across the Ease of Doing Business Index and have been arguing that simplifying setting up a new business is key for a good while now.

  • The Adam Smith Institute might have a point if they were genuinely arguing that small business needs more support to cope with regulation, including the sort of civilised employment standards that workers in 21st century Britain have a right to expect.

    (Though I am less enamoured of their promotion of Jacob Rees-Mog and James Dellingpole, their campaigning against Minimum Alcohol Pricing, and articles like this, by the same author as above, which do exactly the reverse of what is needed: http://www.adamsmith.org/blog/tax-and-economy/cutting-jobs-regulation-will-boost-employment)

  • Eddie Sammon 7th Oct '13 - 5:38pm

    Sam, whilst I respect the motive, we need to stop using the word “entrepreneur”. The word entrepreneur is one that has bothered me for some time because it is about superiority where it doesn’t exist.

    At the end of the day most people in Britain throughout their life will sell their labour and buy capital. There is no difference between someone who sells their labour to an employer or someone who sells their labour to a customer. There is also no difference between someone who invests into a business that they have set up themselves and someone who invests into a business that has been set up by other people, because it is all buying capital. The distinction doesn’t exist, most of us are effectively labourers and capitalists.

    One of my biggest passions is freeing up the legal system to allow more people to become self-employed. Self-employment is about freedom and equality among peers and it is hard to find many motivators greater than that. It is also fair because like I said, employers are effectively customers for your labour.

  • Stephen Donnelly 7th Oct '13 - 7:46pm

    An excellent contribution. Entrepreneur are often outsiders, a group of people that should sit very easily within the ranks of the Liberal Democrats, but will struggle to be heard in other parties that, in the main, support vested interests.

    Politicians often call for a bonfire of regulation, and then struggle to find laws to repeal. In my experience it is the interface between the state and private business that most needs urgent reform. Whilst some QUANGOs have been abolished, the mass of GONGS (government organised non-government) bodies remains untouched. The way the state buys services from the private sector needs a new look, and the provision of service to business needs radical change.

  • People’s political allegiances depend not on where they are in socioeconomic terms, but on where they think they are going. Entrepreneurs as a class (obviously there will be individual exceptions) see themselves as aspiring members of a wealthy, powerful elite, and their votes accordingly go with the party that they think will protect that elite’s interests.

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