Comment: NI rise will dampen entrepreneurship
There are simply things the government can do to encourage a entrepreneurial spirit in our young people. But an NI rise isn’t one of them.
By Azeem Ibrahim
Let’s put the latest election row over Labour’s proposed national insurance rise in context. Everyone knows that Britain has an industrial past to be proud of. During the industrial revolution, we turned the country into a modern capitalist society in little more than a generation.
But lately we have not been living up to that history. Last year, our economy has shrunk, and since the crash, it has no longer been clear which industry is going to raise us back to our previously preeminent economic position. There is a risk of slipping further down the global league.
It doesn’t have to be like that. The key to halting the slide is to create more entrepreneurs. They create wealth and encourage innovation. They were the key to our national economic success in the past, and they can be again in the future, if only we as a nation do a better job of encouraging them. And it’s in this context that we have to judge the idea of a national insurance rise.
The central problem with it is that it makes it more expensive for entrepreneurs to create the jobs the economy needs. The government must encourage entrepreneurship, and this rise would do the opposite.
The government also needs to realise that it does not have the tools to make young people into entrepreneurs. That takes a sense of independence, aspiration, and the ability to turn amorphous know-how into a viable business plan. It cannot be done top-down, by the exertions of a bureaucracy, however committed. It can only be done bottom-up, by the efforts of individuals working to turn their own hopes into plans, and their own plans into reality.
But there are also plenty of positive things that government could do to encourage entrepreneurship. It can help to foster a national culture in which young people are more likely to try to start a business. This need not be expensive; it is often free. Here are a few ideas on how the government might do it. I am unlikely to be the first to point to many of them, and I will not be the last, but I believe that taken together they amount to a constructive set of ideas about how to make our culture more entrepreneurial, and put us back on the road to prosperity.
Firstly, government can provide more mentoring to entrepreneurs, and advertise it better. The Princes’ Youth Business Trust, with which I am proud to work, is a great example of what mentoring can achieve. It helps young people who are unemployed, have no qualifications, leaving care homes, or young offenders, to get their lives back on track with advice and mentoring, and helps them find a job or start a business. It is an example of what targeted support can achieve.
In order to get any business idea off the ground, there are certain things every prospective entrepreneur needs. Help with accountancy, advice on tax, often a basic knowledge of how best to market the business, perhaps how to buy and set up a website, business banking, and often specific advice from others in the field who have been there before and know the pitfalls. Often these come from informal networks of friends and family, who can offer informal advice. But that entrenches a lack of opportunity. Just because you don’t have any friends or family to help you with these basics, it shouldn’t mean you don’t know where to start.
The government could also lower tax rates for small businesses, make it much easier to submit tax returns online (the current website is inefficient and clunky), and subsidise basic business services like accountancy and marketing advice for startups which are in their first year of business. This would send a message that if you have an idea for a business and the drive to turn it into a reality, the government is with you every step of the way.
Ultimately, though, the levers available to the government to alter the culture of Britain` in favour of entrepreneurship are more subtle. The positive effect of a TV programme like ‘Dragons’ Den’ has done more to advertise the inner workings of raising startup investment than any government initiative could ever dream of doing. It showed the public that at its heart, entrepreneurship was about people, often very young people, making their ambitions into a reality. The advantage of this will be long-term. If young people are encouraged to start a business, it does not actually matter that much how successful their first attempts are. The experience of setting it up, drawing up a business plan, seeking that initial investment, and feeling that initial rush of independence and self-reliance, will stand them in good stead for the future. By doing these things, they will learn invaluable skills which will enable them to have no fear of starting up more businesses in the future. And in this way, our culture will gradually change to embrace the benefits of entrepreneurship, the only proven way to lasting national prosperity.
Azeem Ibrahim is a research scholar at the Kennedy School of Government at Harvard University, member of the board of directors at the Institute of Social Policy and Understanding and chairman and CEO of Ibrahim Associates.
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