Why Budget 2013 shows the government is clueless about small businesses

Executive Chairman BAB,The Business Advisory Bureau Limited/EntrepreneursUK and Co-Founder Enterprise Rockers
Business Advisory Bureau Limited and Enterprise Rockers movement.
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Entrepreneur Tony Robinson, co-founder of micro-business support group Enterprise Rockers, says this year's Budget announcement shows that politicians have no real understanding about real enterprise.

I was appalled by the poor behaviour and lack of humility shown by all political parties in the House of Commons during the Budget announcement. They didn't seem to understand the effect their proposals and counter proposals have on the UK population, not just business owners.

Although people put a brave face on it, and pretend to be fine underneath, they are finding it very, very hard to make ends meet. My feeling was that all voters deserve more respect shown by our politicians and they should have conducted themselves better in the House. Just the expenses allowance claimed by most MPs is 3-5 times the current annual income of most micro business owners in the UK. On Budget day, this difference in wealth made our politicians appear elitist. 

My points aren't political as they relate to all the MPs in the House of Commons and their lack of understanding about real enterprise and real people struggling to get by, through no fault of their own. It is not because they don't work long hours or because they don't have the know-how to do business - after three years they know how to run their business better than anyone else - it is because it is a tough trading environment. 

There are many like me who were tweeting in despair that, in my case, after 20 years of being on government small business committees, MPs are still standing up and saying things like 'We have a lot of SMEs in my constituency' (99.9% of business are SMEs!) and political credit being claimed for 'record levels of new business creation' and 'Start-Up Loans', which provide very lucrative commissions to the sellers, creating 'the next generation of 'entrepreneurs'.

The main driver for the continuing high level of start ups over the last 10 years, is just that it's the best available way of earning a living. Big companies have been in melt down regarding the number of jobs they provide for 15 years. 6% of all the startups will go on to become substantial employing businesses (over 10 employees) and 2% will become the 'entrepreneurs' that the politicians in all parties describe.

This lack of understanding causes great ideas to be dangerously skewed in policy implementation. I was one of a number of people that has lobbied consistently, over many years, for improved business support to startups because over 80% of will survive longer than three years with the right support. I asked for the return of the business volunteer mentor scheme and business support vouchers (now being introduced) so that the private sector business support professionals sich as accountants and business coaches would be accessed by prospective business owners in their first few, vulnerable years of trading.

So you could say I have been given all I wanted. Not quite.

Te government's lack of enterprise understanding and pursuit of eye catching targets, means that they water down the idea. So 'business experience' replaces 'enterprise competence' in the implementation. This is not good enough. Startups should be helped by business owners that have at least three years experience of starting and running their own business. Government still don't get that enterprise is different from business studies and an ex-bank manager often doesn't have a clue how to help a new business owner with the vital first task of test trading.    

For the last 15 years I've recommended that there should be no National Insurance as an incentive for a startup to take on their first employee. I also backed Julie Meyer's recommendation that micro businesses (she said less than a £1m profit) should not pay NI. So it was churlish of me not to be grateful for the £2,000 off NI bills. To put the record straight; I am grateful.

However, I was more upset by the amount given out (and it was the same when Labour were in power) to big businesses. At a time when we have the 'bedroom tax' and worsening health and social care it just seems wrong to me that 95% of the £60bn, cumulative, of the Department for Business budget over the last three years has gone to big companies. This is on top of the bail out billions and the employment subsidies billions from DWP to big business. 

So, it just seemed wrong that in an austerity budget £50-6bns more would be going to big business, including the financial services Sector. This, alongside the arrogant behaviour on both sides of the House, I found upsetting.

It made a large sum of £800m on NI to micro-businesses look insignificant in the wider scheme of things. I admit that it is in fact the best thing a government has done in the 26 years I've been running my businesses. It is unfortunate that it has come at a time when I'd prefer it if government stopped all of its business support and training schemes and let the private sector look after itself. 

I just don't believe that major contractors (Capita, A4e etc) and all their sub contractors are the answer. Re-allocate BIS and its civil servants to help with health, social care, primary and secondary education. As long as we have a Department like BIS then government will create an ever more unlevel playing field because the lobbying power is with big business. 

Having made a fabulous start on an enterprise friendly infrastructure with the £2,000 annoucement, I'd now love government to, instead of the plethora of business support/training schemes, use its influence on its big business contractors and funding beneficiaries. All these companies should be persuaded to pay all their suppliers within 30 days. The energy companies can slash energy costs to micro-businesses and still make a whacking profit. Comms companies can provide free wifi in all public places, like Malta. The passenger transport industry can reduce fares. Government should use its influence on regional and local government to reduce business rates and reform the employment law advice, inspection and tribunal system to make it as informal, time and cost effective as other countries.

This tax specialist presents the big business handout at the Budget far better than I can.  


BusinessZone.co.uk questioned Conservative MP Rob Wilson about the claims made in this article. To read his response, click here.


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My attitude over the 15 years since I started my first business has been that government, when it does intervene in (small) business, almost invariably makes things worse. I can think of only 2 major examples where this isn't the case. The first is the drop in the small business corporation tax rate (although we lost the 10% band I seem to remember) - any drop in tax is more money in my pocket and more I can invest. It makes it more likely I will continue in a marginal business.

The second is the NI "rebate". I've employed people before (though I only employ myself and my wife at present) and the employer's NI "contribution" (which is bigger than the employee's contribution) has always struck me as the most unfair of all taxes - essentially you need to add 14% on top of any agreed salary to come to the actual cost of employing them. 

So, removing the first £2k of employer's NI is very good news - it certainly makes it more likely we'll employ people during our busy season starting in December.

Overall, however, I agree with the sentiment. The government should sod off and let us get on with running and growing our businesses. They are utterly clueless about the true pressures of small business - including getting paid on time, finding new customers, getting screwed left right and centre by corporations etc. So I'd prefer it if they simply stepped back and concentrated on reducing our taxes and bureaucracy. And don't pretend they know how to suck eggs.


-- Kevin Partner Scribbleit.co.uk FixedPriceWebsite.co.uk MakingYourOwnCandles.co.uk PassYourTheory.co.uk

The problem is I think one of fundemental failings in Governments of all persuasions.  Big business has their ear, SME get the crumbs from the table...

So we see a Government that is clearly very influenced by the banks, meda giants etc but fails to actually achieve anything with SME.  Cash from the Government to help SME is locked in the bank vaults as banks do not see it as beneficial to them to actually lend it.  Cash for the High Street is locked in Council vaults by the paralysis of indecision and policy.  Yet the Government does not seem to think that either is wrong.

What happened to the red tape challenge?  Has anything actually changed?  Certainly Real Time PAYE would appear to be for the benefit of HMRC not SME. although pitched that it is.

I think Government while talking the talk about business, doesn't do the walking and is long on talk and short of action.  If you have the ear of Whitehall, then things can change as we have seen, but SME do not so continue to be strangled by regulation and to be quite frank Central and Local Government apathy.  Tender criteria for small jobs remain excessive, but even more concerning is the dross that is put out for tender that seems to be a total waste of money and resource.

Government needs to be more effective at real help for SME as this is where it is at for the economy, but to do that it needs to understand small business and create a framework within which business is enabled not stifled.

 I agree with you sentiments Tony.  I too was appalled at  the behaviour of all the politicians.  The response from the opposition was totally unprofessional and not constructive whatsoever.

Picking up the big business theme, we issued a press release prior to the budget calling for support to ambitious small companies who will get the growth going in country via employment opportunity that has real substance.  This is an extract - " Now let’s move on to how we increase employment which will have the knock on effect of raising confidence and increasing consumer spending so fuelling growth.  It is recognised that SME’s provide a large part of the private sector employment (59.1%).  There are around 4.8m businesses employing 23.9m people.  Many of these businesses are having difficulty finding funding to grow as the banks are not lending so employment opportunities are suppressed.

MyMoneyPA is one such business which is seeking funding of £200k which will create seven new jobs immediately and around fifteen to twenty in two years.  The Budget should come up with innovative ways to support business growth beyond the current restrictive and arbitrary methods.

Quantitative easing (QE), initiated by the Bank of England, was created to stimulate the economy.  To date it has committed £375bn to the programme.  QE works with the Bank purchasing government bonds from private sector companies or institutions, typically insurance companies, pension funds and High Street banks.  This releases new funds which the Bank hopes will find there way to businesses and the consumer.  That has not happened as banks have used the funds to shore up their capital adequacy (and pay bonuses).

The banks - RBS, LloydsTSB and HBOS - were bailed out in 2008 to the tune of £37bn and since then they have shed 65,000 jobs, the majority in the UK.  They may also need an additional £20bn due to Basel III.  So we are talking about some big numbers with QE and bail outs.

Going back to SME’s getting funding to fuel growth, if MyMoneyPA was a typical business (and it is recognised that there is no such thing as a typical business) which requires £200k to create seven jobs, then £37bn could provide 185,000 similar funding packages of £200k.  Multiply this by seven and you have created 1.295m jobs.  The QE funding is eye watering when looked at in these terms.  Where is all this money going?  It is accepted that life is not as simple as that described but you can see where funding allocated to the right place at the right time can really make a difference to growth and employment.  What are the banks doing?  We need to find a better way of allocating the public purse to businesses.  The Budget needs to come up with some innovative schemes to assist business directly.  The proposed ‘business bank’ which will ‘operate via existing lenders’ will not work".

I agree: there is something scary about the speechwriting of recent budgets - Brown and Osborne - that is unreal, triumphant, and addressed to imaginary rivals rather than constituents. This is an alternative.

  1. Service industries can often start as freelancers working from home, and government should be contracting-out more of its work to people who do this. If government hires lawyers or accountants with a city address, that should stop.
  2. Manufacturers need machines and space to make things. Changes in planning permission to allow offices and manufacturing by default would sort the problem. My experience of this is with Northamptonshire Enterprise, who find affordable work space and make it un-affordable by doing it up in the hope of attracting overseas-based employers.
  3. SMEs need customers and vica-versa. HMRC holds data about what each VAT-payer states that they do for a living. Like the data at companies house, it could be made public so that online trade directories are easy to write. The next stage would be to request public tenders to be sent to the nearest suitable suppliers according to trade directory classifications. At the moment, suppliers are meant to understand a game-like system and write-in.
  4. People who want to trade with real objects need money, given points two and three.
    Glen Morrill makes this point in the post above.
    http://www.p2pmoney.co.uk/companies.htm lists some of the ways that people are filling the gaps left by banks, who used to lend to business. Funding Circle, Funding Knight, Thincats and Assetz are examples. The Department for Business and Lancashire County Council are also lending taxpayer' money that way apparently, in hundreds of thousands or millions, but every little helps; private lenders are keen too with the sector expanding fast. There are even P2P mortgage finance companies setting-up. But tax is still murkey: can lenders pay tax on net profit, like a business, or are their losses left outside the tax system? If so, lending is not really economic, so this is important. It all depends on HMRC and Office of Fair Trading guidance which the ministers have not bothered to update since P2P lending was invented. It wouldn't even take a change in the law to change a few words on a page, but ministers' have not done their job in updating the guides.

Getting back to rhetoric, and small business, this is the sort of stuff we get from chancellors:

  • Conjectured percentages for five years' time: unreal and triumphant.
  • Tweaks to big business tax breaks on the Alternative Investment Market, or parts of the extra-ordinary tax-free investments that the high-paid are allowed to make: unreal for most of us and unfair.
  • Global Race: beyond comment
  • Departmental Savings: reported without any sign of understanding what happens in jobcentres or the benefits agency, or what happens to taxpayers or claiments; Tough Decisions are not tough if made in ignorance.
  • Aerospace Industry: don't they remember Concord?
  • The Red Book: This is a nic-name for an expensive book with a different title, apparently.
    http://www.hm-treasury.gov.uk/budget2013.htm would help more
  • European Free Trade Association ... India: so Indian states without a welfare state export more for that reason, and UK manufacturers have to close for the same reason.
    This doesn't help people in India or in the UK, I think, even if big advertised UK brands can export there.

- John Robertson runs Veganline.com , an online vegan shoe shop selling products made in the UK

I really support Tony's comments, payment terms can be a real cashflow problem for SME's when dealing with large organisations. Having been in a Corporate and now as an MD of an SME I have negotiated hard to have 30 day payment terms with my corporate clients which is OK when you have a relationship or you can offer something unique. However, I have just come off the phone with an ex colleague of mine who has his own video business, he  dropped everything to support then at short notice, delivered an amazing result for a great price and they are now suggesting 90 day payment terms.  I understand the credit control targets but when you are a billion dollar business paying a couple of grand makes no difference but could make the difference between eating and bankruptcy for an SME. It is about respect or lack of it, SME's deliver great service to larger companies who really shouldnt behave like playground bullies

 - Lucinda Carney CPsychol www.actus.co.uk @ActusAppraisal