Black hole in party manifestos on business needs
ACCA (the Association of Chartered Certified Accountants) has set out a practical alternative manifesto, to counter the failure of the major political parties to address the real needs of business. ACCA is the UK 's leading accountancy adviser to the small business sector and the global leader in business training.
In its manifesto, "An Agenda for Business", ACCA calls for significant reforms:
1. End Tax Inequality for Small Business
Small businesses pay almost 60 times as much on tax compliance costs per employee as multinational companies. The current regime penalises innovation and entrepreneurship. It is ripe for change.
ACCA calls on the next Government to:
• Reinstate the 100% capital allowances for investment by Small and Medium-Sized Enterprises (SMEs) in information and communications technology, which were abolished on 1 April 2004. This will allow SMEs to get the technology they need to comply with regulations on-line, thereby reducing the administrative burden.
• End the harsh tax treatment of those sole traders and partnerships which choose not to incorporate their businesses. They have to pay high levels of income tax (normally 40%), while those which incorporate pay just 19% small business corporation tax. The distinction is irrational and unfair.
2. Sharpen up Regulatory Impact Assessments (RIAs)
The British Chambers of Commerce estimates the compliance costs to business of major post-1997 regulations as nearly £40bn. Yet more than three-quarters of RIAs either fail to quantify the costs to business, or state that the costs are irrelevant. Quantification of the additional costs for SMEs is made in just 7% of RIAs. The Government must develop a more realistic understanding of the impact of legislation on small business.
ACCA calls on the next Government to:
• Give increased ministerial support and commitment to the RIA process. Only with top level "buy-in" will the message that accurate RIAs are essential be filtered down to all those responsible for their introduction.
• Establish an SME Forum that would assess the cost and impact of regulations prior to and post introduction (through a respective review after 2 years) both for UK and European legislation.
• Subsidise legal support for small business owners which can be called upon to help explain the rights of both employees and the business and ensure that businesses are supported accordingly.
3. Regional Business Support - it needs to deliver
The Regional Development Agencies now have a budget of £2 billion and responsibility for local business support. The RDAs need to develop measurable objectives and outcomes to improve the co-ordination of, and communication between, regional and local organisations involved in the provision of business support. The redundancies at Rover and Littlewoods illustrate that RDAs need to engage with the private sector to ensure that individuals and businesses affected are given the right advice.
ACCA calls on the next Government to:
• Work with the banking sector to ensure that there is a range of suitable loans and grants available to help business start-ups.
• Conduct comprehensive analysis of the effectiveness of current government funded business support activities, with the focus on value for money and relevance to the market.
4. Help Women and Ethnic Minority Entrepreneurs
If women were to set up businesses at the same rate as men in the UK, there would be another 150,000 enterprises created every year. But women and ethnic minorities still face distinct barriers and discrimination when setting up in business, with, for example, women receiving one - third of business start-up funding as compared with men.
ACCA calls on the next Government to:
• Introduce more micro-credit programmes which feature small loans with business support. These programmes provide a business track record which assists in the acquisition of bank finance.
• Work with key intermediaries, such as the accountancy profession, to identify and overcome the barriers women face in terms of receiving equivalent levels of start-up funding as men enjoy.
• Support investment-ready initiatives which assist women to develop ideas, business plans and presentations to secure external investment.
5. Don't Let Student Debt Thwart Graduate Entrepreneurship
Students are leaving University with an average debt of £13,000 which is projected to rise to over £30,000 post-2006. This is affecting graduates' ability to set up their own business, which will have a detrimental effect on the UK economy.
ACCA calls on the next Government to:
• Address student funding to ensure that debt does not discourage dynamic entrepreneurs from contributing to the economy.
• Develop financial solutions, in conjunction with banks, for graduates. These could include debt counselling, business and finance education and the introduction of a finance scheme similar to the Small Firms Loan Guarantee (SFLG).
• Work with Universities, Regional Development Agencies, accountants, business support organisations, banks and Government Departments and agencies to ensure there are joined-up policies and initiatives.
6. Raise Financial Literacy
Many of the financial problems people face are created by a lack of understanding about why they need to pay taxes, why they should plan for the long term and, in some cases, how to run successful businesses.
ACCA calls on the next Government to introduce compulsory basic lessons for secondary pupils which cover issues of:
• Tax
• Pensions
• Entrepreneurship
• Financial planning
The course content should be developed in partnership with qualified financial professionals.
7. Pensions - Government Must Deliver Accessible and Flexible Schemes
With a reported £300 billion black hole in pension funds and equity markets awaiting a sustained recovery, politicians must act as soon as possible to encourage and enable individuals to save for their pension, while providing incentives for employers to offer good pension schemes to their staff.
The next Government must address the complex rules currently governing pensions and act to:
• Slash the costs attached to the individual of consolidating different schemes into one fund.
• Give real incentives for people in the 25-35 age group to save for their retirement through a new yearly "cash back" payment.
• Amend the discriminatory annuity rules which force the self-employed to take out personal pensions - despite the fact that, in the event of death, the pension pot reverts to the insurance company and not the saver's family. This is a serious disincentive to saving.
8. Encourage Innovation
Research shows that many entrepreneurs do not capitalise on their ideas and lose out to competitors. UK businesses are world leaders in innovation and intellectual property, but need the right environment to encourage development and growth.
The next Government must:
• Establish and publicise a scheme to highlight the significant business benefits for SMEs of registering their intellectual property.
• Deliver new tax incentives to ensure long-term investment in innovative small businesses.
Commenting on the manifesto, Allen Blewitt, ACCA Chief Executive, said:
"It is disappointing that the main political parties' manifestos have paid minimal attention to the wealth and employment creating sector that we all depend on. The overwhelming majority of businesses in the UK are small businesses, with fewer than fifty employees and these are the employment creators. There is still time in the election campaign for the parties to address the real needs of small business."
For more information contact:
Andrew Silverman, ACCA Director of Communications and Public Affairs
020 7059 7284/07715 367060
Ian Welch, ACCA Head of Corporate Communications
020 7059 5729/07739 862928