Get out the way: Small firms must be allowed to return UK to growth

THE EUROZONE crisis is like a tragic opera: a torturous tale in which half the cast will be dead by the intermission. Of the Eurozone’s 17 characters, 12 are in recession, while all are banking on Germany to play the hero and keep the whole racket going. Monetarists and Keynesians disagree on how to return to prosperity, as the average European citizen becomes separated from a performance with seemingly no beginning, middle or end – only endless noise.

The show must not go on. It’s time to stop the madness and face up to the fact that the “men from the government” can’t help Europe. It’s going to come down to the business people, the entrepreneurs, to take back their countries. Civic society must not just be an extension of the state.

Look at the situation in Britain. We’ve plunged into the first double-dip recession since 1975 and we’re enduring our longest economic slump for a century. If we keep doing what we’ve done, we’ll get more of what we’ve got – sluggish growth and high youth unemployment.

If the chancellor is really serious about creating growth and kick-starting the economy, then he needs to be transparent about the numbers and create the right conditions for growth.

Creating the conditions for growth means freeing up people to create their own jobs. Notice how industrious people are in the developing world. People in low-income families in countries outside of the G7 typically hold down several jobs – a mix of informal roles, trading relationships and running small businesses that they have set up. I’m continually impressed with people from Eastern European countries who know how to work hard. They outperform their Western European counterparts in their drive to get ahead.

Britain’s government needs to put power in the hands of entrepreneurs and individual capitalists. It can start by cutting the oppressive red tape that is tying the country’s 4.8m small to medium-sized enterprises in knots. It could remove statutory PAYE and National Insurance contributions for companies under three years old. And it could abolish IR35, the punitive and complicated tax code that is designed to catch “disguised employees”.

Until a microfirm (cake-baking, cleaning, sewing, child-minding) is making more than £100,000, we should release them from 75 per cent of regulation to help them get their business going. We should create no-fault dismissals in companies so that, when a new hire just doesn’t work out, both parties can shake hands and part without spending time (or money) in an employment tribunal.

In my new book, Welcome to Entrepreneur Country, I argue that the government needs to lift the tax burden from the “Davids” – the vital six per cent of small but high-growth businesses currently creating 54 per cent of all new jobs – and enforce the tax code on the “Goliaths”, the large corporates. Companies like Goldman Sachs and Vodafone cut deals with HMRC, but small to medium-sized enterprises don’t have that kind of clout. Google, which uses a complicated structure to send most of its overseas profits to tax havens, paid just £8m of corporation tax in Britain, despite making more than £6bn in revenues in this country in the six years to 2010. If that was really the legal minimum that Google had to pay, then someone is not thinking through the tax framework very well. I’m not playing Robin Hood, I’m trying to align incentives and to look at the facts: small business indirectly subsidises big business.

The role of government is not to dither and bicker about the Eurozone. It’s not to act as a kind of feudal landlord that takes our money, no questions asked. It’s not to infantalise us. The role of government is to shape an environment that fosters and speeds innovation, enabling new industries and markets to emerge. Economics must be in the driver seat, not politics.

When power devolves, progress soars. It’s time to trust the people.

Julie Meyer is chief executive of Ariadne Capital and author of Welcome To Entrepreneur Country (Constable, £12.99).