Is the sun setting on our entrepreneurial world

We are told that what our economy needs is patient capital – no short-term investment for short-term gains.

Yet the prospect of Entrepreneurs’ Relief being slashed or even abolished in the next Budget will dramatically transform the UK economy over the next several years, all in the name of impatient tax. This looks like a short-term tax grab with drastic consequences.

As Michael Lewis described in his book The Fifth Risk, the risk posed by incompetent government leaders, the displacement in time between action and impact can be disastrous. This is exactly the situation we are facing with the change in Entrepreneurs’ Relief.

So why is this happening?

I remember my days as a young production engineer in an office with 40 of my peers. When I was promoted to be one of three industrial engineers and subsequently, the senior industrial engineer, I realised the benefit of being in a group of one. Or conversely the disadvantage of being in a group of many. Giving me a ￡1,000 rise was easier when I was in a group of one. However, it was almost impossible to give me anything like that when I was in a group of 40. That is the reality; everyone had a budget to manage.

The same is true of the tax system. We have created an entrepreneurial society and built a whole eco system of support to accelerate the economic benefit. That puts entrepreneurs in a group of many and as such a rich target for taxation. So, this is not so much about social justice as about tampering with taxation and dare I say it, taking the “fifth risk”. 

Ending ER in its present form is a way of increasing Government income in the short-term. Boris has said ER makes “staggeringly rich" people "even more staggeringly rich". I beg to differ, Mr Johnson.

I am the son of a waitress and a foundryman brought into this world in a tenement flat in Stirling. I have had to fight tooth and nail for every penny of my income, and boy, have I made some sacrifices. I sold two businesses in the last two years. Between them these businesses created employment for more than 150 people. My financial gains never made me staggeringly rich. So, what did I decide to do with the proceeds?

Before I sold the businesses, I was diagnosed with cancer, which is a good reason to give up working. I am no spring chicken at the age of 64 – another fine argument for throwing in the towel. So, did I join the ranks of the staggeringly rich? No. I took most of the money I had gained and put it back into business. Since I joined and invested, one of these businesses has increased employment from 100 to 150, is exporting to 34 countries around the world and this year we expect to employ another 100. Is that not what we want our Government to stimulate?

Messieurs Sunak and Johnson want to catch the mega-rich and prevent them from getting tax breaks, but really, the big sharks are relatively few and far between. 

The collateral damage is that they catch a whole host of fish that keep the economic ecosystem alive. Any fisherman will tell you the perils of over-fishing. This change to ER is the equivalent of over-fishing the entrepreneurs, and before we know it there won’t be enough of them to create wealth for the many throughout the economy.

This is a “fifth risk” decision. Not good when we need our government to take a longer view and be patient with tax.

Lee Kuan Yew is a great advert for playing the long game. He was in direct charge of Singapore for 30 years and what he did was transform a third-rate nation into one that today leads the world in many ways. His time in office afforded him the luxury of looking at the longer-term.

As a working-class boy, the bizarre thing is that I have paid more tax in the last three years than my father earned throughout his 50 year working life. My appeal to Mr Johnson is not to punish us all because of the few that mix in his social circles.