Only entrepreneurs can save the UK from going over the cliff
Only entrepreneurs can save the UK from going over the cliff. The following is a letter I had published in the Financial Times almost three years ago. While the numbers may have changed a little, the basic message remains the same. Sadly, while cost cutting has been started, very few steps have been taken to address the UK's core problem - its lack of growth.
Imagine a publicly held company with revenues of £500m and costs of £700m leaving it posting a current year loss of £200m. Imagine, too, that this company already has £700m of debt and that it is forecasting that debt to increase beyond £1,000m over the next three years. Would any sane investor consider lending to or investing in such a company?
This is exactly the state of theUK’s current finances, except to say that the numbers are actually billions rather than millions. TheUKis in a mess and it is extremely difficult to see how it is going to trade its way out of it. Quite simply, we are living way beyond our means and drastic action is required.
The last time we faced such awe inspiring deficit numbers was in the 1970s and then we had to go cap in hand to the IMF for a bailout. It took many years and the proceeds ofNorth Seaoil and the sale of government owned assets (remember “tell Sid”) in order to repay these facilities. This time, however, we are really up against the wall. Most decent state controlled assets have been privatised (who wants to buy the Royal Mail?) and we are a net importer of oil and gas.
Cutting government spending by £200bn is one way of balancing the books but is any politician really going to push for an almost 30% reduction in public expenditure? This is political suicide. Understandably, therefore, there are now increasingly vociferous voices demanding that taxes should rise. The problem is that middleEnglandcannot stomach a doubling of income tax, which is what it would take. It is little appreciated that real take home incomes have fallen for the majority over the last 40 years. It is only by virtue of both parents going out to work and the availability of cheap credit that such a drop has not been appreciated and social unrest avoided. As these factors are unable or unlikely to be repeated anytime soon, middleEnglandcannot afford massive tax hikes.
“Tax the rich”. “The rich should pay more”. These are the war-cries of today’s vote seeking, left of centre politicians. The problem with this is that the rich are perfectly capable of moving abroad to avoid the taxman’s net. In the 1970s we coined the phrase “brain drain” to describe the loss of talent due to high taxation. Today, the rich and the moderately well off are much more mobile than back then. Quite simply, taxing the rich is not a viable option for digging us out of the hole.
The only way forward, unless we are prepared to wait a whole generation to pay off government borrowing, is to ignite an explosion of entrepreneurial activity of early industrialisation proportions. We need to lower taxes, encourage business formation and celebrate not denigrate wealth creation. In this way, the tax take will increase in a sustainable fashion and theUK, once again, will be the place to be for the world’s talent.
- Array
Litopia is the winner
Philanthropy is Dead
Whilst it is interesting to see our country as a bank account, it does not mean that we will all be better off because a few people make themselves rich. And that is the crux of the problem. For three decades 'entrepreuners' have happily had their physical product made in countries like China where there are no human rights, no sickness benefit, no public health care and no unemployment benefit. The same goes for India, old Soviet block countries etc. These products could be made in this country and still be sold at a profit. However, by having them made in countries that do not look after their citizens they make a bigger profit.
Contrast this to the old philanthropic entrepreneurs who lived amongst the people they employed and sought to better their lives. The likes of Rowntree, the Co-operative movement and others would have point blank refused to have their products made in countries where children are starving whilst their parents toil to earn a living that does not pay enough to feed their family.
Here lies the difference. It is not entrepreneurs we need. It is people that are not riven with greed, who genuinely seek to create an internal British market where enough people are employed on a sufficiently high wage to be active consumers. Of those that are already super rich, very few actually live here or pay taxes here - we are just another market to plunder and to hell with the consequences for Britain.
I don't think many/most
I don't think many/most people in Britain fully understand the term "entrepreneurialism".
When you can make riches beyond the dreams of Croesus in your early twenties by trading entirely fictional financial instruments, which even their creators don't fully seem to understand... why bother with a "real" hard, sweaty business?
The prevailing ethos of the times is not in tune with entrepreneurialism, and that may well be our undoing.
Get rich quick merchants are not entrepreneurs
Peter You are right. Get rich quick merchants are not entrepreneurs. They risk the money of other people, not their own, and take all the upside for themselves. The truth is that small businesses employing less than ten people have created most of the new jobs when coming out of past recessions. We need to encourage those businesses, not stand in their way with red tape, high taxes and bureaucracy. Many of them walk a fine line between financial failure and growth. To see them lumped with fat cats does them all a disservice. Cheers
I don't think people
I don't think people denigrate wealth creation. They are appalled when it is re-distribution of fiscal assets from the less well off to the wealthy disguised as wealth creation. You know as well as I do that the only way to ignite the kind of industrial growth you describe is slash and burn union membership, health and safety at work, wages and workers' rights and recreate a subjugated underclass. It seems that its not just Steampunk that seeks to re-invent the Victorian era. You could always just indenture people on benefits to 'wealth creators', that would save time.