In a speech to the Forum for Private Business today, Conservative Leader, David Cameron said:
“I’m pleased to report that the spirit of entrepreneurship is alive and well in this country.
Recently, I visited the London Academy.
One of the boys marched up to me and demanded my autograph.
“Do you collect them?” I asked.
“No way” he said, as I signed. “This is going straight on eBay”!
Smaller businesses and the self-employed are vital to this country.
One of the key indicators of economic health for any nation is an active and growing SME sector.
So today I want to explain to you what a future Conservative government will do to help small business.
We need a change of attitude from politicians towards small business.
We need a clear plan of action that will help small business.
And we need much greater aspiration for the future of small business.
Why Small business matters
First, attitude.
Let’s be clear about the scale of the contribution that smaller businesses make to the UK economy.
Small and medium-sized enterprises together account for more than half of both employment and turnover in Britain.
Small enterprises alone account for 46.8 per cent of UK employment and 36.4 per cent of turnover.
And around two thirds of commercial innovations come from small firms.
These are the businesses that, quite literally, keep Britain going.
Politicians often visit schools, hospitals and police stations where they see how the country’s money is spent.
They spend far less time visiting the businesses where the money is made.
Government can and should help
For politicians to understand the importance of smaller business - both for our economy and our society - is only half the battle.
We must also take active steps to create a positive climate for enterprise.
This is not intended to be a partisan speech.
I want to set out positive proposals to help small business, rather than bang on about the other side.
But we have to be honest about the consequences of almost ten years of Labour.
The proportion of our population starting businesses is now lower than in Italy, Canada and the USA.
The number of new registrations with Companies House actually fell last year.
It’s not hard to work out why.
The burden of taxation and regulation on our smallest employers has gone up.
In a recent study, over three quarters of businesses surveyed said that the cost of compliance arising from regulations has risen.
Any government that’s serious about helping its small business sector has got to answer a specific set of practical questions.
Are we making it easier, or harder, to set up a business?
Are we making it easier, or harder, to employ people?
Is the overall burden of tax, public spending and borrowing going up or down?
Politicians need to understand the realities of life for the entrepreneur and wealth creator.
Does it take an employer more time, or less time, to fill in their tax return?
Is an employer spending more time, or less time, dealing with red tape?
Are the costs of complying with legislation and regulation going up, or down?
We know the answers to these questions.
In short, from this government you’re not getting the support you need.
Action
It’s time for a new approach.
So let me spell out the action that we would take in four key areas:
Taxation, regulation, business support and procurement.
Tax reform and simplification
Our position on tax is clear.
Economic stability must come before tax cuts.
We will never take risks with interest rates.
But we also know the damage that our increasingly complex tax system is doing.
That’s why George Osborne set up the independent Tax Reform Commission – to produce a menu of options that will help us build the simpler, fairer and flatter tax system that Britain so badly needs.
The Tax Reform Commission, led by Lord Forsyth, will publish its report tomorrow.
It will be the most significant piece of work on reforming and improving the tax system ever undertaken by an opposition.
Britain needs comprehensive reform of the tax system.
Tax law in this country has developed in a piecemeal fashion over a long period of time without any systematic or overall review.
That’s why tax simplification is absolutely crucial.
We must focus on simplifying Gordon Brown's increasingly complicated tax system.
Tolley's Tax Handbook of the British Tax Code was 4,555 pages in 1997.
Nine years later it has doubled to over 9,800 pages.
That's 10 times longer than Tolstoy's War and Peace – and much less of a good read.
A survey of British businesses carried out for the Tax Reform Commission found that more than three quarters of businesses thought the tax system had become more complex in the last five years.
And the number saying the tax system had become less complex?
Two per cent.
According to a Government report, the administrative burden alone of tax regulation on our businesses is over £5billion every year, nearly half a percent of GDP.
We know that the burden of tax complexity falls hardest on smaller businesses, who can’t afford to employ professionals to steer them through the tax maze.
And rising complexity is at the root of the increasingly antagonistic relationship between government and business over tax avoidance.
A simpler tax system would stop the endless game of cat and mouse.
Complex taxes are harming our competitiveness and driving away investment.
We believe that when it comes to business tax, by removing exemptions and broadening the base on which tax is charged, we could simplify the system and reduce headline rates.
The Tax Reform Commission is looking at a number of other proposals to make life easier for small business.
One obvious one is to consider the feasibility of aligning the period of charge for the national insurance and income tax systems.
Overall, our commitment on tax is absolutely clear.
I want to share the proceeds of growth.
That means that with a Conservative administration, the economy will grow faster than the government.
Michael Forsyth’s Tax Reform Commission has produced an impressive report on how we can simplify and reform our tax system.
It contains many welcome proposals, and tomorrow George Osborne will set out our broad response to them.
Of course we want to reduce taxes on jobs and wealth creation.
But we will not commit to unfunded tax cuts.
So our strategy will have three key components.
First, economic stability as our number one priority.
Second, to simplify business taxes - which would help pay for lower headline tax rates.
Third, to rebalance our tax system - shifting the burden of tax from families, aspiration and opportunity to pollution and carbon emissions.
Deregulation
But it’s not just the complexity of our tax system that hits small business.
Regulations have a disproportionate effect.
The 50 per cent increase in regulations each year since 1997 is extremely difficult for small businesses to cope with.
That’s why I want to help the smallest firms first.
There are different ways to achieve this, and we’ll consult with business to identify the best way forward.
What matters is that business knows the direction a Conservative Government will take.
This direction will determine the precise steps we take to reduce the regulatory burden.
Steps like exemptions, reducing the gold plating of EU laws and making regulations the last resort for Whitehall.
Too often regulations are the first resort of Government.
We will make Conservative Ministers responsible to Parliament for showing that every alternative has been tried and failed before seeking statutory regulation.
This would apply across all regulations and businesses, but would be a vital tool in achieving the goal of halving the burden of new regulations on small businesses.
I’m asking one of our brightest new MPs, Adam Afriyie, the Chairman of the Conservative Deregulation Taskforce and himself a successful entrepreneur, to set out clear proposals to embed a more business-oriented culture throughout government, so civil servants really understand the impact of new regulations on the small business community.
Social Chapter opt-out
When we talk about regulation, it’s impossible to avoid the role of our principal regulator, the European Union.
In particular, we need to look at the Social Chapter.
No British government will ever build an environment in which enterprise can truly thrive unless it controls the power to legislate in this area.
That’s why Britain must not stay in the Social Chapter.
I know this is controversial.
But I will be guided not by dogma - either Europhile or Europhobic - but a hard- headed assessment of what works for Britain.
And it is obvious to anyone who knows anything about business that the Social Chapter doesn’t work.
Reforming government support and links to business links
Another area crying out for reform is government support for business at home.
Many small businesses complain that the quality of business advice is poor, that money is wasted and the 3,000 schemes which government now runs are confusing and complicated.
We want to improve this.
That’s why we’ve set up a task force to review the whole system.
It’s going to be led by Doug Richard, who some of you will have seen on Dragon's Den.
It’s time to breathe a bit of fire into the way government advises business.
Another area we can improve is government support to exporters.
Other countries are streets ahead of us.
President Chirac took 1,000 businessmen with him when he went to China last year.
UKTI has explicitly focused on inward investment to the UK which has come at the expense of promoting UK exporters.
We’ve even got a trade minister who doesn’t like to travel!
Amazingly, until business lobby groups campaigned against it, Gordon Brown was planning a 12 per cent cut in UKTI's budget and a reduction in staff of 25 per cent.
A Conservative Government can, and will, do better.
We believe that a champion for small business is needed in Government.
Someone able to contribute across Whitehall and who has the ear of the Prime Minister.
We are already preparing for this and I have appointed Mark Prisk, who many of you will know, as my Shadow spokesman for small business.
Government as purchaser
There’s another way that government can help small businesses.
By buying from them.
At the moment, less that a fifth of government money that is spent on the procurement of goods and services goes to small and medium enterprises.
Why?
I suspect there’s an element of bureaucratic laziness.
In Government, we will insist that 25 per cent of state contracts go to small and medium sized firms.
We will look at making all government bodies list their available contracts on the 'Supply2gov' website, so small businesses can bid for them.
And we’ll look at whether we can curb the widespread local government practice of requiring three years of accounts from bidding companies.
Even before the next election I intend to lead by example by ensuring that the Conservative Party develops its own small business procurement policy.
Aspiration
Finally, I want to talk about aspiration.
One of the reasons I’m determined to lead a government that understands small business and its needs is because I have such huge admiration for the people who run them.
Our society tends to concentrate on the rewards that success brings.
There’s an almost obsessive focus on how much money entrepreneurs take out of their companies.
And far less focus on the other things they take.
They take the initiative in starting out on their own.
They take the risk of failing.
They take the responsibility for paying employees, suppliers and the taxman.
They stand for aspiration.
They stand for innovation.
And they stand for one of the most precious values in any healthy society.
Whoever you are, whatever your background, your race or your religion.
If you have the ability, ambition and will to work you can make your own fortune and be your own boss.
So I’m not afraid to say I admire those men and women who don’t settle for the easy life and who make the money that keeps our schools and hospitals and other public services going.
Our society depends so much on their courage and ambition
So I believe it is our social responsibility to encourage and support that ambition.
We must champion the values of enterprise.
Not just at events like this.
But throughout our society and culture.
I know there are many initiatives out there already doing this – particularly in schools.
But we’ve got to go much further.
A few initiatives are not going to turn around a whole culture.
We need everyone, at every level, in every type of organisation – government, the media, universities - to have a positive attitude to business and enterprise.
To know and understand and deeply feel that profit is not a dirty word… that business is a force for good, and that entrepreneurs are the engine of progress.
As Prime Minister my aim will be to make Britain the best place to set up and run a business.
I want to encourage the next generation into enterprise.
The role of government is to set a long term direction, not engage in short term meddling.
To listen to wealth creators, not to turn a deaf ear.
With the next Conservative government the door of government will always be open to you - the men and women who we all rely on.”