Have your say! Business regulation

Have your say! Business regulation

April 14, 2010 by Rory MccGwire

Earlier this year, entrepreneur and founder of The School for Startups, Doug Richard, published his Entrepreneurs’ Manifesto – a “declaration of rights” for small businesses.

The manifesto sets out eight demands to a new government, each of which addresses a different key concern for businesses. In the build-up to the 6 May general election, Donut MD Rory MccGwire is offering his thoughts on the issues raised by Doug Richard.

In his manifesto, Doug Richard argues that business regulation should be streamlined so that people can start businesses more quickly and run them more easily. 

I agree. But in order to achieve this, I think the law must make an important distinction between small and large businesses. They have different regulatory requirements. What is fair and suitable for one is often neither fair nor suitable for the other. 

It’s also important to recognise the natural bias in our regulations, a bias that stems from the fact that regulations are always going to favour the people who make them. So our regulatory system is heavily skewed towards the preferences of the government, the public sector, big business and the trade unions. 

The seemingly simple task of taking a chunk of time off for a family holiday is a struggle for many people running a small business, so it’s hardly surprising that they do not have time to assist in the law-making process. 

Nor do the various small business membership organisations have the power to make much of a difference. Think back to when the government raised CGT by 80 per cent without realising until afterwards that for many small businesses the only “pension” available at retirement is the proceeds of the sale of the business. A £1m threshold was hastily added, but not before it became obvious that the small business lobby groups had not even been consulted on this legislation, let alone listened to. 

Yet it’s small businesses that end up paying the price for so much of the legislation. Take a law requiring organisations to offer wheelchair access to their premises. I’m sure everyone agrees that society wants to help make life less difficult for disabled people. But few people stop to consider who will be forced to pay for the door widening. We all pay for the doors to be widened in the public sector buildings and the corporate buildings, through our taxes, pensions and savings (some of which are invested in listed shares), which seems completely fair. 

But when it comes to all the properties owned by small businesses, it’s the business owner who pays. So if I earn a £20k salary working for the local council or for a big company, I am not affected at all, but if I would have earned £20k from owning a shop, I might be left with just £17k after the adjustments to my shop front. How can that be fair? It’s not. It is merely convenient, both for the lawmakers and for the Treasury. 

It’s the same with employee rights. Nobody questions the need for new parents to spend more time with their children. But who pays? There’s no compensation to any of the small business owners who pick up these costs. In a small business, every member of staff is a key person and losing them, even temporarily, is a considerable blow. Larger businesses have the resources to cushion the blow; small businesses don’t. 

Given that small businesses employ a very considerable proportion of the workforce, I suggest that society ought to compensate small businesses if we all want to have those benefits. If not, you end up with a situation where business owners are terrified of employing women of a certain age. It’s discriminatory, but it happens; the law has massive unintended consequences. 

Sensible regulation is essential to protect customers, employers and employees. But it must recognise the reality of running a small business. 

So much of our business regulation is designed for Hewlett Packard and Rolls Royce, not for “mom and pop” businesses. But, in my view, firms with fewer than five employees should have a completely different set of regulations. If you choose to work for them, perhaps you shouldn’t have quite the same rights as employees in larger companies, simply because these rights amount to robbing Peter (the employer, who is a person) to pay Paul (the employee). But then you would be discriminating against employees of small businesses, which is clearly wrong. 

So the only fair solution is for society (aka the taxpayer) to face up to, and pay for, the cost of implementing all these rights, instead of turning a blind eye while the costs fall onto the shoulders of small business owners. 

Doug Richard is right and all the political parties seem to agree. We need to do something to enable the moms and pops to run their businesses in a more flexible and efficient way. Now let’s see if anyone actually does anything. 

What do you think? 

Rory's other Have your say! blogs

  • Have your say! Business support – Part 1
  • Have your say! Business support – Part 2
  • Have your say! Business support – Part 3
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    What do you think about the regulations affecting small businesses? Please leave your comment below.

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    Comments

    I agree with your post red tape for small companies and sole traders is a joke. Even worse for those in the food business as the old H & S issues kick in. There is all the tax issues, H & S, T & S and many many more things. All these things take time away from customer care and generating sales.

    I like the idea of getting rid of more legislation (red tape). When was the last time a political party ran with a policy of removing some laws. I guess that there are too many lawyers making the money for that to be a popular move amongst the political classes.

    Would a hung parliament make it more difficult to get legislation through government and would that therefore mean that we would have four years of less new laws? Would that be a good thing for small business? Big business doesn't seem to like the idea of a hung parliament but maybe that is because it is more difficult to lobby to the entire parliament rather than one set of Whips....

    How's that for a hate list for small business: Politics, Lawyers, Big Business and Lobbyists - all in two paragraphs..

    Thanks Vivienne, I know from long experience that FSB, FPB and others are staffed by what I call “true believers” and you do a great job of being a thorn in the side of policymakers who would otherwise ignore the needs of SMEs far more than they already do.

    I reckon that the policymakers are doing their best too, they just have no idea what it is like to live in our world where customers must be serviced and bills paid while we juggle our limited cash and resources, fighting whatever fires have appeared that day!

    Returning to the theme of maternity and paternity rights, the employers who I have met who are most angry about the massive disruption to their own families are, you’ve guessed it, women who run small businesses. These women have the same rights as their employees, but it is simply not feasible for ‘the boss’ to take chunks of time off, especially if the boss is already covering for other people’s maternity and paternity absence.

    The “re-imbursement” of statutory maternity pay and sick pay makes it look fair and sounds great for the media soundbites of politicians and the government department responsible for this legislation, but these payments are also a smoke screen that hides the true cost to the employer.

    And of course the employer is usually a mum or a dad, who is forced to spend less time with his/her own family in order to cover for the absent employees.

    This was certainly the case for my wife when she was running a travel company in the 90's (while having three children herself). The workload was crippling at times, as recruiting and training someone new just for the period of maternity cover was completely unaffordable.

    I live in hope. On Thursday I was at a talk by Helen Alexander, President of the CBI and all-round business super-hero. She understands these issues and is a pragmatist. If things are changeable, the people who will make the change happen will be people like us “at the bottom” Vivienne, and people like Helen “at the top”.

    On this issue I think it is the women who have to push for change, as male employers will be discounted as “self-interested” and “people who do not understand”.

    I'm afraid it's only going to get worse.

    Once upon a time, MPs were drawn from the community. They weren't paid enough to be full-time MPs, so they had second jobs to boost their income. This had the advantage of giving them valuable experience that would inform their role in parliament.

    Now we have full-time MPs who have experience of little else other than climbing up the greasy pole of their political party. They have never run anything, never taken tough business decisions, and have no understanding at all of what it means to be a small business. It's no surprise that they make the wrong calls when asked to decide between worthy social goals and the needs of entrepreneurs.

    We also need a full and frank debate as to the 'fair' level of tax payable by entrepreneurs. I don't believe it's supportable for the state to claim as much as it currently does. But your mileage may vary. Yet to be able to reduce business taxation, you would have to reduce state expenditure accordingly. It isn't easy.

    Hi guys - I would really like to have you involved on Policy within the FSB.

    Funny you should mention the issue of capital gains and pensions. I spotted that! Although employed by the FSB, I have been in business and come from a long line of bsuiness people so as soon as I heard that I hit the phones!

    Yes the result is not as good as it should have been and we should have been consulted from the start. But it is only in the last few years that the penny has started to drop with senior civil servants that small business are actually the economic life blood of the UK.

    Think about it - they come from a large organsiation background and little or no inkling of what we are about unless we make the effort to educate them - and that is what the FSB has been doing over the last 10 years.

    I know that my SW Chairman and I got the tax relief as part of the credit crunch package. I know we got the ability to spread the rates increase last July. I know we got the boiler scrappage paid to individuals so they can choose their fitter rather than had been done previously where it was channelled through the big firms.

    Nationally similar work is going on - but it is actually quite hard to point out the things you have stopped from happening.

    We could be more effective with more real life case studies to make the point. Increasingly the politicos are listening to us, but to make a difference we need real evidence of the damage that is being caused. Not all business people want to have their private business talked about with politicians.

    We would really like to hear your examples of how red tape has taken your valuable time or delayed you or even cost you money. I know it is the total burden and no one rule is a problem on its own - but they want examples.

    The best example I ever had was the guy who employed a cleaner for 4 hours and then had to spend an hour on admin as she then took family tax credits. That example was very influential in getting the system changed.

    Apart from case studies, our other problem is people - we don't have enough business people willing to give their time to help.

    Even with over 200,000 members we cannot employ all the staff we really need - but real life business people make the case better.

    So - join us and help us with your subscription.
    Even better, join us and get involved.

    Rory- Great point- what I want to know is how effective is The Federation of Small Businesses (sic?) as a lobbying organisation- surely they should be making these points- but regulation seems, as you say, to be more influenced by the M&S's of this world.

    Rory, yes, I think a lot of it is to do with having part-time staff for the dining rooms, some of whom are not UK nationals (and I now have the very best excuse to go and ask her some more questions, at her place of work, naturally). Yes, we should pay the right tax. I wonder if Stephen Hester at RBS is paying the 'right' tax? LOL

    Mick, I'm never quite sure what people mean when they say they spend all this time on "red tape".

    What are the forms they are being asked to fill out, for whom?

    Or are they simply referring to doing their accounts and then paying the correct tax, NI and VAT. If it is indeed just this accounting, then I think it is disingenuous to call this red tape. Any business needs to do its accounts anyway, and paying tax is fair enough if we all want to use the roads, schools and hospitals.

    Now, if on top of doing our accounts your friend has to do 16 hours of summersaults to fill out tax forms, then yes that is red tape, but once these things are set up (albeit having probably had to pay someone to do so) surely they are not that difficult?

    Having said all that I just bought a sandwich at The Cheese Shop opposite our office. Chris, the Australian owner, works with his wife and refuses to hire anyone even part-time as "it is simply not worth it, too much red tape".

    There's a lot of lip service paid to the idea of buying locally, using local suppliers, local produce and so on. Those businesses servicing this need tend to be small. And, given that almost all businesses in the UK are small with few if any employees, it should be these same small and local entrepreneurs that will drag us out of recession. Yet they feel the burden of regulation much more than bigger firms. They don't have admin staff doing the paperwork. They do it themselves. My friend who runs two pubs reckons she spends 16 hours a week staying on top of the red tape. I wonder if this is why so many traders stay 'under the radar' and work for cash through a network of contacts all doing likewise?

    I believe in keeping these things simple.

    My personal view on business regulation?

    STOP IT!

    Displaying 1 to 10 of 11 results

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