PINSTRIPE
I am often struck by the tiny beginnings of what are now successful global companies. Apple, started by Steve Jobs in his parents’ garage, is a particular example but there are many others, including in the UK, where remarkably small amounts of money - the £1,000 left by a grandmother, £100 borrowed from a friend - have provided the critical capital which has started a business which has gone on to create wealth, tax and employment.
We desperately need successful businesses in Scotland to help grow our sluggish economy. The best way to get a larger number of successful big companies is to create a larger number of successful small ones.
What you don’t hear much is an entrepreneur saying the vital help which enabled them to succeed is a training course or marketing support from Scottish Enterprise.
What Scottish Enterprise does all looks very worthy - “Innovation, Internationalisation, Investment, Inclusive Growth” - but is it really working? It’s doing some good but is it the best use of scarce financial resources? I fear it is not. My own interactions with Scottish Enterprise have left me rather dubious. There is a bit too much job sharing, flexi working and meaningless job titles for my liking.
So what can we do to help boost things a bit? The most important thing is actually that we should do less. We should stop trying to run so many programmes, have so many agencies, targets and people pushing papers so that ministers get reports. What is needed is a bit more chaos - because chaos is an opportunity rich environment which breeds innovation, which in turn creates products and services which allow great companies to be built.
Here are some ideas to develop a few more sparks of economic life.
First, allow an individual who starts a company , owns the majority of it and works in it , to set the company’s early losses against their personal income tax paid in the 3 previous years. This means that somebody who leaves a secure job and starts a company is able to set the early losses against income tax they have paid previously so that they get a cash tax repayment from HMRC.
Second, apart from the most basic requirements not to do something illegal or be patently reckless as regards health and safety, allow a company in the first couple of years of its life to be exempt from pretty well everything - no VAT, no employment legislation, no form filling - nothing. Just let the people get on with building a business.
Third, create a zero bureaucracy Enterprise Opportunity Fund. Lop whatever is needed off the Scottish Enterprise budget each year and give it to a new body run by independent trustees who must demonstrate they have successfully run a real business for at least 20 years (I am not thinking Michelle Mone here), pay them nothing, let them hire not more than 10 staff and be located in cheap premises in somewhere like Dumfries. Then allow anybody resident in Scotland to apply once for funding of £10,000 which will be used to buy 10% of their company under an agreement of not more than 2 pages. The trustees should be instructed to give anything that isn’t illegal or completely nuts the money - if in doubt hand it out - then no audits, no follow-up, no gender balance targets, no form filling. Some of the money will be blown on holidays, the majority of the businesses will fail - but some absolute gems of companies will be born.
Pinstripe is a senior member of Scotland's financial services community.
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