Last week I met a successful entrepreneur who sold the company he had built up some time ago. He told me he was on strike.
I knew exactly what he meant. Like many others, he has concluded that there are too many regulations, too many tax complexities, too many difficulties employing people for him to want to put his money back to work in a single company he runs.
Of course I was happy to see him, as maybe we can help him with his portfolio of investments. Supervising us running a portfolio of ETFs is much less hassle than hiring and firing staff, complying with health and safety, mastering the latest regulatory requirements on your industry and avoiding the pitfalls of modern employment and environmental law. It might also be more rewarding. You don't need to go into the office every day, you do not have the headache if no-one turns up for work because it's snowing. You are no longer so overwhelmingly responsible as a good boss is in his own business.
My new entrepreneurial friend objected to the mood of some in our country. Why do they think, he asked, that we entrepreneurs are always thinking of a mega bonus and pay out? He found that every day he was thinking of meeting his customers needs, of the safety of his employees, of his compliance with all the requirements the authorities impose, and above all with sorting out the crisis of the day which can happen in even the best run businesses. If the mood becomes too anti-enterprise it will put more and more people off having a go, setting up their own business. The rich will live on their portfolio income, and the poor will live on benefits instead.
This is one of the reasons we remain negative on the UK. The last few months have seen higher income tax, higher National Insurance, higher motoring taxes and the bank bonus tax. All these measures send the signal that the government thinks enterprise can pay more. They ignore the footloose world we live in, where people can set up their offices and businesses in lower tax jurisdictions if they wish. It ignores the ability of successful entrepreneurs domiciled here to hang up their boots and live off the results of their past labours.
If the UK is to get back to its old trend growth rate, let alone make up for the large loss of income and output inflicted by the recession, it will need many more entrepreneurs. At one end of the income scale there are good entrepreneurs on strike. Why should they venture again? Why is government so hostile to them, they ask. At the other end are people with no jobs, who might be willing to give working for themselves a go, who find the rules and controls on benefit payments can make that difficult if not impossible.
Meanwhile, the banking controls still militate against a plentiful supply of credit to small business. The regulators are tightening in the midst of a nasty downturn, the opposite of what is needed. Even the government is finding it dearer and dearer to borrow money, despite the quantitative easing. When we recommended selling gilts in January 2009 the yield on a 25 year gilt was just 3.8%. This week it is 4.5%. That means longer gilts have fallen around 11% since then. We think they have further to fall, as we have not yet reached the point where Bank of England purchasing dries up. Nor have we reached the point where the government has a credible plan to curb the deficit.