Economy: Growth

Earl of Lytton Excerpts

Thursday 6th December 2012 Lords Chamber

[The Earl of Lytton]

My Lords, this is an enormously important report. It sets sheer practicality in a philosophical context, and I hang my hat on that.

By virtue of my professional business and chamber of commerce interests, I have spent much of my life, like Voltaire’s antihero, Candide, noting both cause and effect while observing that current times are not the best of all possible worlds. The elephant in the room is the unnecessarily adversarial nature of much of our national politics, legal system and regulation. This creates risks and, in public administration terms, the response often seems to be inward-looking and protectionist, sometimes as turf wars but primarily in defence of systems rather than outcomes for growth. This has consequences. The Federation of Small Businesses surveys support my own long-held view that small businesses in particular still bear disproportionate burdens in terms of regulation, employment and tax treatment. For example, nobody wins by turning employment rights into a legal battlefield and the general costs to small businesses are, I believe, unsustainable.

The informer network of HMRC has been likened in this week’s press to the Stasi. The taxman’s reputation for aggressive treatment of small businesses is well known. While this department formally accepts some tax avoidance schemes—it has a box for it on its forms—it is an avid player in a game of catching out the ignorant, weak and unwary, even if honest, while apparently shrinking from bigger issues and slipperier customers. Similar generic shortcomings, dual standards and ignorance occur downstream in every aspect of business life.

On the plus side, though, is the growth in microbusinesses. Many are home-based and rural-based, outsourcing much of what they need and requiring little direct employment, and thus avoiding workplace pitfalls. Many are not VAT-registered or incorporated. The internet facilitates this virtual world of micro-commerce. West Sussex, where I live, apparently has 27,000 of them, but no one knows quite how many make up this major element of local GDP. Is this simply opting out in favour of lifestyle choices? Is it a consequence of obstructive and ephemeral laws and regulations? Is it a desire to keep beneath the radar? Or is it a new economic dawn? What might it mean for national economic policy?

I applaud the efforts that the Government are already making to cut red tape. The UK remains a great place to start a business. It also needs to be a great place to grow one on. This splendid report shows that we need a revolution in regulatory attitudes and I hope that the Government are listening.