How the new government should stimulate growth
-Joe White is COO of Gandi.net and Moonfruit.com. The opinions expressed are his own.-
After days of negotiation, we now (finally) can see the shape of the new UK government.
Dealing with the deficit will be top of the short term agenda for the government, but general economic reform must be part of the longer term plan for both the Conservatives and the LibDems.
Their main concern will be to find a new source of growth for the UK economy that isn’t so heavily reliant on the financial services industry, which has proven to be not as stable as once thought.
Encouraging the growth of new businesses, particularly in high-tech sectors, and drawing on the world class universities we have could be an effective way of creating sustained, long-term growth.
One of the primary mechanisms to encourage entrepreneurialism has always been taxation policy, particularly around capital gains tax.
One of the first pledges which came out of the coalition government was to increase the capital gains tax from 18 percent to nearly 40 percent, but it will be accompanied by additional relief for business assets and they’ve signalled support for some kind of entrepreneurial relief.
Entrepreneurs’ relief currently gives business founders a lifetime allowance of 2 million pounds of gains on business assets which are only taxed at an effective rate of 10pc. Entrepreneurs take risks to create companies, create jobs, create growth. This should be encouraged, and the signals from the new government show they recognise this and this makes me feel optimistic about its intention to support entrepreneurs.
The subject of business creation and entrepreneurial support also touches upon immigration policy, which is another hot topic in this debate. The anti-immigration arguments focus on immigrants taking jobs from native UK residents and putting strain on UK public services and housing.
However, immigration can not only be a source of skills, but also a source of entrepreneurs. This is a fact that the US has long recognised, and is looking to further support – many of its successful companies particularly in high tech, have been founded by immigrants.
In February, Senator John Kerry and Senator Richard Lugar introduced the Start-Up Visa Act in the U.S. Senate.
The bill would create a new category of visa that allows any foreign national who is able to raise at least $250,000 to move to the U.S.
They would become a permanent U.S. resident once the business created five jobs or achieved $1 million in revenue, or if they had managed to raise a further $1 million.
At the moment, we have some of the best universities in the world which attract some of the best students globally. What we don’t do well enough is to give those bright minds an incentive to stay. While the details of the Start-Up Visa Act may not appeal to policy makers here, the principle of it should.
In order to create new businesses and new jobs, we should be open minded about opening up our borders to foreign nationals with great minds and good business plans. They won’t be taking British jobs, but rather creating them.
Taxation and immigration policy are just two examples, but they illustrate the wider point. The new government should really focus on entrepreneurs as a growth engine for the economy and develop a holistic set of policies to encourage them to build businesses in the UK.
While I’m encouraged by the first indications from the government, I still think there’s room for more.