The early stages of the election campaign have been dominated by discussion of what the future will hold for UK businesses after May 7. I want to see the next government build on what’s already been achieved in the last five years to support British entrepreneurs and address the issues that scaling businesses are faced with.
From my perspective, the most important aspects of the relationship between government and entrepreneurs are that policy must be stable, consistent and reward entrepreneurs for their efforts. Uncertainty is bad for business and entrepreneurs have to be able to trust the government not to move the goal posts or chop and change policies unnecessarily.
Originally introduced by Labour, the Entrepreneurs’ Relief allowance was doubled by the coalition government to £10m in 2011. It enables business owners to pay a lower rate of capital gains tax when they sell part or all of their business.
It is initiatives like this that ensure entrepreneurs are incentivised to succeed and operate safe in the knowledge that they can work to grow a business without paying draconian tax rates when the time comes to cash in on years of hard work. But, according to the National Audit Office, the cost of the relief has increased to almost £3bn and the need to find cost savings throughout the next parliament could see it scrapped.
We must avoid a knee-jerk reaction. Scrapping or limiting Entrepreneurs’ Relief would punish those that it is intended to reward and would threaten our economic recovery. Fast-growing firms have created many of the new private sector jobs since 2010; we must continue to celebrate and support our nation’s entrepreneurs and not punish them for their success.
This move would send out a message that the government is no longer on the side of entrepreneurs and founders at the helm of growing businesses. Siphoning off the gains of those who have risked it all and built a successful business from the ground up would also severely disincentivise those people considering striking out alone from doing so. That would have negative consequences for all of us.
It is also important that entrepreneurs are rewarded for their efforts. They drive our economy’s growth and often take huge risks in order to succeed. They should be supported and rewarded for this leap of faith and ambition.
If the next government is serious about backing British business, as all parties profess to be, changing our tax system in a way that would discourage our best companies from scaling into world leaders would be a step in the wrong direction.
Entrepreneurs need to know that their government backs them and encourages them to scale and grow in a stable and sound environment that is not constantly being modified. Britain has a flourishing entrepreneurial ecosystem and a range of robust policies that have helped to develop the entrepreneurial spirit behind our nation’s growth in recent years. The next government should look to build on this, not reverse it.