Small businesses are the backbone of a dynamic, entrepreneurial economy and society. They are the innovators, creators and activists, people who take an idea and run with it in the marketplace. They are the ones who do not rely on the state for handouts, they are ‘get up and go’ people who put in long hours and take real risks.
Small businesses are also the nation’s largest employer: the Small and Medium Sized Enterprise (SME) sector of 4.77 million (BERR) firms is responsible for 55% of total employment including 50% of manufacturing jobs1.
UKIP supports small businesses and we will do all we can to provide the right framework to support SMEs. You will find in our Tax and Budgetary paper our plan to reduce taxes, end Employer’s National Insurance and eliminate the deficit. A surging budget deficit and ballooning national debt will benefit no-one, small businesses right up to large multinationals. In our Foreign Affairs and International Trade paper we explain how we will negotiate our own free trade deals, opening up new markets for British businesses in North America, South East Asia and out kith and kin in the Commonwealth. Our Jobs, Skills and Enterprise paper has the range of long-term programmes of major investment UKIP proposes and new ‘Production Enterprise Centres’ (PECs) which will assist small and medium companies to seize opportunities in the British market and in our exports abroad.
In this paper we set out how we will repeal damaging regulations – which are mostly emanating from the EU and being gold plated by our own UK government – 120,000 EU laws so far. We needn’t forget that it doesn’t matter which other old party gets in, the LibLabCon are committed to the regulatory burden Brussels lays on our economy. EU regulations are non-negotiable. EU Directives can be even worse, giving the government the opportunity to gold plate EU objectives. The EU’s remote, unaccountable and undemocratic structure, its army of lobbyists, and its ability to be influenced to the benefit of large corporations to the detriment of SMEs is deeply damaging to the UK economy.
It is also a reality that large businesses can entrench their own positions and protect themselves against competition from smaller and growing businesses by excessive regulation, whilst each regulation imposes a cost on every business large or small, the relative burden of complying with it is disproportionately larger, the smaller the business is. Rather than a single regulation being the problem, it is the cumulative burden of too many regulations that so damages SMEs.
UKIP is the only party in a position to offer Small and Medium sized Enterprises lighter regulation, because we will leave the EU and no longer be bound by their rules and diktats. Only UKIP can turn off the flow of laws, interference and costs emanating from the EU. We are also the only party looking to simplify and lower taxes and reduce regulation radically. We cannot just cut our way out of trouble, we need to grow our way into recovery.
We set out here our Small and Medium sized Enterprise policy statement for the innovators of the UK. We want to put our economy back on track and encourage and reward the level of entrepreneurship that will help rescue Britain from its economic woes.
2. Excessive Regulations
2.1 The Burden of European Union Regulation on SMEs
The think tank Open Europe has compiled a list of the Top 100 EU Regulations, ranked by their cost to UK businesses2. The total annual cost, according to the government’s official Regulatory Impact Assessments, is given at around £18 billion every year. The true cost of EU membership is independently estimated at up to £120 billion a year3. An example of the costly new application of a regulation is shown in Appendix 1 (concerning asbestos regulations).
Five of the most damaging or costly regulations are: the Working Time Regulations, the Climate Change Act, Energy Performance Certificates for buildings (leading to Home Information Packs (‘HIPs’)), the Temporary Agency Workers Directive (not yet implemented) and the Vehicle Excise Duty (Reduced Pollution) Regulations, which will cost over £12 billion in one year alone. But the EU is generally behind most additional ‘domestic’ regulation such as employment regulation.
This probably vastly understates the cost to the UK economy as a whole: in 2006 the then EU Trade Commissioner admitted in an interview with the FT that EU regulations cost the European economy around 5.5% of GDP. Using his estimate, EU regulations depress the output of the UK economy by around £80 billion4.
UKIP sees little or no need for any of these regulations, for example:
Working hours should be agreed between employers and employees; wages and salaries will tend to adjust to provide adequate compensation.
The same logic applies to temporary workers – as a general rule, there is a price to be paid for better job security and holiday entitlement, and that is to accept lower wages or salary than offered to those on short-term contracts. For the employer, there is also a price to pay for the benefits of being able to use a flexible labour force, and that is to offer a higher wages or salary than that offered to the permanent workforce. This flexibility, unique to Britain and Ireland within the EU, is directly threatened by the deeply damaging proposed Temporary Agency Workers Directive.
As explained in our policy paper ‘Secure Energy, Better Environment’5 we are unconvinced of many of the arguments behind the man-made ‘global warming’ scare and would repeal the Climate Change Act and the requirement for Home Information Packs.
3. The Burden of Employment Regulation on SMEs
The major category of burdens on SMEs are employment regulations, most of which are ultimately imposed by the EU and some which are ‘self inflicted’.
3.1 Employment contracts
A potential employee is usually in the weaker bargaining position when it comes to negotiating the terms of his or her individual contract of employment, so it is tempting for the government to try and win the votes of employees (who inevitably outnumber SME owners by a huge margin) by imposing terms into employment contracts which appear generous to the employee. The inevitable result of such self-serving government interference into the millions of contracts that are entered into each year is hugely misleading and, with all distortions, the costs to the economy as a whole always outweigh the apparent gains.
UKIP would put an end to most legislation regarding matters such as weekly working hours, holidays and holiday, overtime, redundancy or sick pay etc. and provide a statutory, standard, very short employment contract template. The first column would contain the main areas – such as days’ holiday or weekly working hours, the second column would show a typical figure for all employees (or employees in that specific type of business) and the employer would enter a figure into the third column (which might be more or less generous than the figure in the second).
A copy of this template would be made available to all candidates before the job interview, to enable them to compare and contrast between different jobs and to save embarrassment during the interview itself. Copies of the agreed list would be given to employer and employee when the job offer is agreed, and only in the absence of such a list, would the terms of employment revert to the statutory default.
Those employers who offer relatively generous terms would be able to use this in their advertising and might be able to attract better candidates or pay slightly lower salaries, and the reverse would apply to employers who demand longer working hours, or offer fewer holidays or fewer days’ sick pay etc.
3.2 Parental leave and Statutory Maternity Pay (‘SMP’)
The EU is responsible for a great deal of UK employment legislation. A good example of excessive EU regulation is proposals for ‘longer and better maternity leave’6. The head of the commission appointed by the UK government to look into implementation was the Human Resources Director of a large supermarket chain7, who ultimately adopted the EU’s proposals as intended.
Commonsense tells us that larger organisations employing thousands or tens of thousands of people can easily accommodate a small and stable percentage of their employees being on maternity leave at any one time8; as the small additional cost to the large employers can easily be borne by reducing overall wage levels by a similar percentage, and there is no need to take on extra staff for maternity cover.
Contrast this with the real life experiences of small businesses employing a dozen or fewer people: the simultaneous loss of one or two staff, with the requirement to take on replacement staff while keeping the job open in case the mother decides to return to work, can be a ruinous exercise, not to mention the administrative costs and the cash cost of Statutory Maternity Pay. The impact on small businesses is disproportionately damaging.
As a result, many SMEs are understandably nervous about employing young women, or try not to promote them to key positions. Yet, instead of returning to the root cause of this, the UK government has chosen to implement a raft of anti-discrimination legislation; all enforced by yet more quangos and inspectors, to persecute SMEs who do so. The demands of running a small business are conspicuously ignored.
UKIP proposes to vastly simplify this legislation. It would be up to each employer to decide whether to offer parental leave and this would be one of the items included in the standard employment contract (see above). An SME which refuses to offer parental leave will either have to offer young women higher salaries than other businesses which offer a long leave period or they will simply have to recruit from a smaller pool of potential employees.
UKIP accepts that there is a tension between helping young families at a time when they have to accept a significant fall in income and improving the employment prospects of young women while reducing the compliance burden and costs on businesses.
But, on close inspection, the rules on SMP are simply ridiculous. Paying SMP is primarily the liability of the employer, but large employers can reclaim 92% and small employers can recover 104.5% of the cost by reducing their monthly PAYE payments accordingly9.
UKIP is in favour of simplifying the welfare system and reducing wasteful bureaucracy. Rather than playing the ‘money-go-round’ with the attendant administrative burden, UKIP would abolish SMP entirely and simply allow parents who stay at home with their children to claim a weekly parental allowance set at the same level as the Basic Cash Benefit proposed in our welfare policy (in other words, around £64 per week for parents aged 25 and above) regardless of how long they are off work and regardless of the other spouse’s income.
The same principles would be applied to Statutory Sick Pay, Statutory Paternity Pay and Statutory Adoption Pay. The taxpayer would pay for a basic level of £64 a week, but this would be dealt with as part of the welfare system with no need for employer involvement.
Each employer would be free to offer continued salary payments for employees on parental leave if they so wished, and this would be included in the statutory template as explained above.
UKIP would retain existing health and safety legislation relating directly to the health and safety of mothers-to-be, including doctor’s appointments, as this is a matter of great importance.
3.3 Pension Schemes
UKIP’s proposals are included in more detail in Section 8 of our policy statement on Pensions10.
In short, UKIP sees saving for a pension as a matter of personal choice and responsibility, and the tax breaks and various other measures merely distort people’s individual decisions. For many people, especially those who are risk-averse, paying off the mortgage as quickly as possible would be a far more sensible choice.
UKIP would scrap any obligation on employers with five or more employees to auto-enrol their employees into a Stakeholder Pension scheme or the proposed National Employment Savings Trust. Employers would be free to offer participation in these or any other schemes they think will be useful to their employees, and the membership of a defined benefit or defined contribution salary scheme would be on the matters to be mentioned in the template employment contract.
UKIP would also scrap the Pension Protection Fund, which merely pushes the cost of bailing out badly run or underfunded schemes onto those employers who respect the spirit and letter of their pension promises, although this is probably of less interest to SMEs.
3.4 ‘Equal Rights’ and Employment Tribunals
UKIP believes there is too much centrist interference in employer/employee relations. It is far better to allow localised tribunals to build up a body of practical case law and real life examples on what is, and what is not, acceptable, and to occasionally embody these into consolidating statutes, than it is for the government, largely in the name of some ‘equality and discrimination’ agenda to constantly impose more and more rules on employers who then find it almost impossible to work out which particular rights given to one perceived victim group trump those of another group.
There is also a hierarchy of wrongs. The maximum award for unfair dismissal is calculated in a similar way to redundancy payments (a multiplier based on the employee’s age and length of service is applied to the employee’s weekly earnings) which makes good sense. However, the Tribunal can award unlimited compensation in the case of ‘discrimination’ or ‘dismissal on health and safety grounds’11, which is unjust and excessive.
UKIP would legislate to ensure the scope of claims which can be heard by tribunals will be greatly reduced. In particular, limits on unfair dismissal and discrimination claims will be re-instated and no unfair dismissals or discrimination claims would be admitted by the Tribunals in respect of employees with less than two years continuous employment.
UKIP believes tribunals should have a balanced partnership of employers, trade unions and independent partners. An appeals procedure should also be introduced. Tribunal hearings should also be made open to Freedom of Information requests.
UKIP would additionally scrap most ‘equality and discrimination’ legislation, cap all compensation payments and allow commonsense to prevail. UKIP would punish fraudulent, mischievous complainants, including punishment for legal representatives who institute grossly excessive, speculative or fraudulent claims (such as some ‘no win no fee’ solicitors) through legal sanctions.
4. Training and Apprenticeships
If the economy is to grow, the country in general and exporting industries in particular need real skills at all levels, be that apprenticeships or post-graduate degrees.
The number of young people in apprenticeships in the UK has dwindled over the past decades for a number of reasons, the answers to which are fairly obvious once the root cause is identified:
a) The number of young people attending university has increased dramatically. University places are subsidized by the taxpayer – the top-up fees usually only cover part of the cost of a degree – and to a greater degree than vocational training for apprentices, so it would be important to even out taxpayer support between the two (via the Student and Training Vouchers we propose, or the welfare system). Universities and Further Education Colleges should all be liberated from Government control to set their own entry criteria, thereby driving up standards throughout education, particularly in schooling.
b) UKIP sees no merit in having an arbitrary target of 50% of school leavers going to university to take degrees of questionable value, so by dropping this target, the number of people choosing an apprenticeship would increase.
c) The wages paid to an apprentice were traditionally below the going rate for a comparable full-time job with no promise of a formal qualification, because the employer has to take into account the fact that the apprentice will take days off to attend college, and also budget for the fact that simply completing an apprenticeship has a significant value, so once qualified, an apprentice can demand a correspondingly higher salary.
d) The National Minimum Wage (‘NMW’) was set above the market wage for many apprenticeships, reducing the number of places on offer even further. A reduced rate of £2.50 per hour for apprentices in their first year of training is to be introduced in October 201012 but this is far too little too late.
e) The welfare system drives a horse and cart through the economics of apprenticeships, as the market wage for an apprenticeship is in many cases less than what can be claimed on the dole. The key to UKIP’s welfare policy is to replace all working age benefits with a flat rate Basic Cash Benefit (BCB) paid to most or all British citizens with no, low or fluctuating incomes (with the quid pro quo being that claimants are not entitled to a tax-free personal allowance of £11,500). Such a system would not discourage any young person from taking up a low paid job such as an apprenticeship, as the choice would be between claiming the BCB or claiming the BCB and keeping 69% of any earned income on top (assuming a flat tax rate of 31%).
f) The entire system of means-tested student grants and loans would also be replaced by the BCB labeled ‘Student and Training Vouchers’, so the welfare system in itself would not influence people’s decisions whether to take a low paid job or to go to university.
g) The decisions as to what and how is taught on vocational training courses (above and beyond a reasonable proficiency in The Three Rs), which would be subsidised to the same degree as secondary or higher education, and preferably via Vouchers, would be taken out of the hands of quangos and given to employer organisations and industry bodies as far as possible.
h) UKIP will encourage qualifications from independent Chartered bodies and administered by the people from the industries chiefly concerned, such as City and Guilds, Engineering and Science Institutions – all independent of the government.
5. The Burden of Taxation on SMEs
5.1 Value Added Tax (‘VAT’)
UKIP would replace the EU-imposed Value Added Tax (VAT) with a Local Sales Tax (LST) at the same rate of 17.5%, but with a proportion of that (up to 5%) being paid direct to local councils. The aim is to ensure local councils control at least half their income, rather than a quarter (as is the case now), with the rest of the funding being subject to Whitehall diktats and with strings attached. It would be up to local councils to decide whether the proceeds could be used to cut local business rates or provide other local business incentives where desired. Over time, UKIP would look at reform of VAT/LST, recognising that the VAT threshold of £70,000 can act as a barrier to growth for SMEs.
5.2 The Flat Tax
The cornerstone of UKIP’s tax policies is to roll Employee’s National Insurance and basic rate income tax into a flat rate of income tax of 31% for all sources of personal income (except pension income) which is to be kept at 20%. There would be no higher rate tax – partly funded by restricting tax relief for pension contributions to the first £10,000 of contributions per annum from the colossal sum of £255,000 now – and partly funded by ending other tax breaks and loopholes.
UKIP would also increase the personal allowance from its current level of £6,475 – well below any sensible poverty threshold – to £11,500. This would obviate the need for cumbersome and bureaucratic Working Tax Credits, and would more than compensate those for whom the marginal tax rate is currently less than 31% (interest income, rental income or self-employment income).
5.3 Employers’ National Insurance
The LibLabCon-sensus parties are currently bickering over whether the ‘tax on jobs’ (namely Employer’s National Insurance) should be increased or not, which they claim will raise an additional £6 billion (less than one per cent of annual government spending).
UKIP opposes the ‘tax on jobs’ in principle. All taxes on economic activity income and profits depress economic activity, but the damaging effects can be minimised if all income or profits are taxed at the same rate. Whether the burden of Employer’s National Insurance is borne most by employers (in higher employment costs) or by employees (as lower wages) is a separate debate.
UKIP’s policy would be to phase out Employer’s National Insurance over the term of one Parliament, (at 20% per annum for 5 years), and would make an immediate start by broadening the base and abandoning various exemptions.
UKIP will also seek to scrap the exemptions for payments to the self employed (or at least, those not registered for VAT), the ‘threshold’ of £110 per employee per week and the exemption for certain benefits in kind such as pension contributions would enable us to bring the rate down to about 7.5% immediately, which in turn would greatly simplify the calculations for employers – they would be able to calculate the monthly payment as a flat rate applied to one total figure, rather than having to calculate the liability for each individual employee.
In following years, the rate would be reduced to 6%, 4.5%, 3% and then the tax would be abolished. The cost of abolition would be recouped through higher income tax receipts, reduced welfare payments, higher corporation tax and sales tax receipts.
5.4 Corporation Tax, IR35, PAYE and the CIS
The basic principle of broadening the tax base and simplifying and flattening the rate applies to all these other taxes, which are just disguised income tax.
a) Corporation tax. Businesses operated through a limited company superficially benefit from a small companies rate of corporation tax of 21% for the first £300,000 of profits (against the mainstream corporation tax rate of 28%). Most limited companies will benefit from the phasing out of Employer’s National Insurance, and it does seem fair to have a medium-term aim of harmonising the rates of income tax and corporation tax to avoid complexity;
b) Under UKIP’s proposals, a whole of raft of anti-avoidance legislation, such as the IR 35 rules13, cases such as Arctic Systems14 and rules against income shifting would quite simply become excessive and could be scrapped. The total tax bill would be the same whether somebody is employed or self-employed; whether income is routed through a company and taken as dividends or salary and how income is shared between a married couple;
c) PAYE would be much simpler with a flat tax rate of 31%. Expenses on benefits in kind (primarily company cars) would simply be added back at company level rather than being allowed in full and then the employer having to go through the rigmarole of preparing P11D forms, in other words, the tax treatment of an employee’s company car would be exactly the same as the car used by a sole trader or partner in a partnership;
d) The Construction Industry Scheme is yet another layer of madness, which crudely replicates PAYE but for sub-contractors. Even more bizarrely, while the contractor has to deduct quasi income tax of 20% of gross payments to a subcontractor, the contractor still has to pay over the 17.5% VAT (which most contractors can reclaim as input tax anyway). It would make far more sense and minimize the administrative burden and tax evasion by treating sub-contractors either as ordinary businesses (who would be paid gross) or as employees (with no VAT liability and a flat deduction of 31% on amounts exceeding the tax-free personal allowance).
6. Business Rates and Tenancies
UKIP recognises the fact that small businesses pay far more in business rates proportionally than larger companies as a percentage of turnover. A better balance needs to be achieved, particularly at the lower rates end. It would be desirable, for example, for reductions to apply to the first tranche of business rates rather than have a cut-off point.
UKIP is also very wary of the unintended consequences that tend to flow from legislation that interferes with private contracts. With business tenancies however there are good arguments for giving tenants some protection against the right of landlords to regular, upward only rent reviews, with a minimum increase equal to the rate of inflation.
UKIP would suggest that if such a tenant is not prepared to pay the higher rent that they be given the statutory right to remain in occupation at the old rate for a further twelve months on condition of then vacating the premises and the lease terminating. The tenants rights under Part II of the Landlord and Tenant Act 195415 would be unaffected. An option to reduce costs should be considered.
UKIP also proposes that landlords be made primarily liable for Business Rates as freeholders and that new leases, and any leases renewed in future, be treated as inclusive of Business Rates, which will cushion their tenants against changes in Business Rates. Business rates are currently adjusted for inflation every year, as set out by the law, with the rateable value of the property being reviewed every 5 years.
UKIP proposes to pay a proportion of Uniform Business Rate (UBR) direct to local councils at a standard rate of 50% of UBR. Local councils currently collect UBR but pass all the proceeds on to central government. Elected local councilors will be able to decide on more generous rate cuts to assist SMEs. UKIP will consider giving local councils the power to levy additional local rates on ‘out of town’ retail parks relative to high streets.
7. Other Regulatory Pressures on SMEs
7.1 Health and Safety
UKIP believes – like any other party – that health and safety at work is vitally important, but we would focus resources on those industries in which most deaths and injuries occur, in other words more on agriculture (5.7 deaths per 100,000 workers per annum) and construction (3.4 deaths) and less on manufacturing (1.1 deaths) or services (0.3 deaths)16.
UKIP would prefer an overall shift to occasional site inspections by people with actual experience in that industry instead of an army of Health and Safety Inspectors recruited straight from school or university. UKIP would specify that all Inspectors and senior administrators working in the Health & Safety Executive must have a minimum of 3 years practical experience in industry. UKIP would also end ‘gold plating’ of Health and Safety regulations.
UKIP would back this up with proper criminal sanctions for those employers, including personal liability for the company director nominated as responsible for safety issues, whose employees suffer death or serious injury if the employer fails to meet accepted standards in each particular industry.
UKIP will conduct a full and frank debate on what these accepted standards should be.
7.2 The Role of Insurers
One of the few very useful legal requirements imposed on UK employers is the requirement for every employer to insure against the risks of death or injury to its employees. Insurance companies have extensive facts and figures on the relative risks based on decades of insurance claims, and are thus in a very good position to place a price on risks. UKIP proposes that the findings of any site inspections carried out by government officials – whether positive or negative – be reported to the insurers, who can set the terms of their insurance accordingly and will of course demand that measures are taken to minimise risks to employees for which the insurance company would ultimately have to pay.
The ability of inspectors to levy fines or shut down premises would be reserved to only cases that can be considered criminal. We would hope that the threat of increased insurance premiums – or the possible refusal of insurance – would be a powerful enough sanction.
7.3 Food Safety Regulations: The catering industry
Apart from a few isolated incidents, the overall record of UK restaurants is very good and most outlets trade for decades without any incidents whatsoever. Ironically, it is the state-managed NHS itself that has the poorest record with regard to food safety17. This is the area on which a UKIP government would focus first. Proposed franchises for NHS hospitals would specify higher standards for food safety.
One main driver in the private sector is the need for outlets to maintain their reputation – this is particularly noticeable with larger chains or franchises. The franchisor of a fast food chain, even one widely regarded as ‘down market’, has every motive to ensure that each and every outlet pursues the highest standards – as the reputational damage and media embarrassment caused by one outbreak of food poisoning would place the whole chain at risk. Recently, for example, a London Kentucky Fried Chicken outlet admitted breaching hygiene rules in April 2010, with the KFC spokesman saying “We took immediate action to bring the restaurant back up to our strict hygiene standards.”18.
To this end, UKIP would be happy for smaller outlets to self-regulate: for example, owner-managed cafes and restaurants could adopt their own ‘hallmark’, and pool the costs of inspection and insurance. Every outlet using a particular scheme would have an interest in ensuring that all the other users of that hallmark comply with the highest standards, as to do otherwise would cause other members reputational damage19.
The general principles with regards to inspection and insurance as apply to other health and safety measures would also be applied to food hygiene.
8. UKIP’s Proposals to Reduce Regulation on SMEs
UKIP has a general policy of freeing employers from burdens which are not to do with their job of creating value and in particular do not apply to our international competitors. UKIP proposes:
a) To amend the Race Relations Amendment Act (2000) so that it is much less intrusive into the affairs of companies and organisations, in particular, by removing the need to positively promote ‘diversity’ in the workforce which many see as divisive. The Employment Equality (Religion or Belief) Regulations (2003) and the Employment Equality (Sexual Orientation) Regulations (2003), which each implement EC directives imposing duties on employers to positively promote social engineering policies, will be repealed as a natural consequence of leaving the EU. Contract compliance as practised by the Greater London Assembly, for example, will be outlawed. UKIP will oppose measures in the ‘Equality’ Bill to force employers in the public sector to discriminate against the indigenous male population and to apply contract compliance to enforce such treatment on staff in private firms bidding for public sector contracts.
b) To make the in-out sunset (IOS) principle apply to trade regulations. Every new regulation would only come into force if accompanied by the repeal of a substantive regulation then in force for the products or services cited in the proposed new regulation. This is of particular importance in the building industry.
c) UKIP proposes that where the ‘trading while insolvent’ offence does not apply, the disqualification provisions of the Companies Act 1985 be extended explicitly to those directors who recklessly endanger the viability of their companies by, for example, excessive salary and dividend payments.
9. UKIP’s Proposals for Support for SMEs
9.1 Late Payment and Non-payment
A major concern of all SMEs is when customers and clients do not pay their bills on time. Whilst recognising that business-to-business payments, one party’s loss is another party’s gain, of course, UKIP believes that existing systems for small claims and statutory demands operated by County Courts, which are reasonably cheap and unbureaucratic, are valuable, but that Small Claims Courts must have the power and means to enforce judgements properly. UKIP will legislate to allow tougher enforcement.
An SME’s worst fear is non-payment because the customer has become insolvent, as this can lead to a domino effect. It is more or less impossible to legislate for this after the event, but UKIP would make it much easier for creditors to make the directors of a company who have been trading with intent to defraud personally liable, and criminally liable in the most extreme cases.
9.2 The Right to be Self Employed
UKIP will reinforce the right of the self employed to remain self employed and not be deemed to be employed on the whim of tax officers in pursuit of additional National Insurance from employers and more immediate PAYE payments in contrast to self-employed tax return payments. The onus legally should be on how the parties in written contracts describe themselves and their working relationship. UKIP’s tax reforms will reverse Employer’s NI in any case, and make all tax simpler and less bureaucratic.
9.3 Improving Access to Government Contracts
UKIP would make it a condition that the terms of all contracts for goods and services provided to any government body would be made freely and publicly available – from huge contracts for motorway or tunnel building all the way down to bulk stationery orders by the local council, subject to a de minimis limit of £1,000 and exemptions for militarily sensitive matters.
No government or Audit Commission can possibly hope to police all such transactions, but there will always be interested parties who will be keen to investigate unusually generous terms and bring the matter to light.
UKIP would seek to break down larger contracts into smaller parts which are adjusted for inflation every year so that SMEs can realistically compete for more government tenders.
9.4 Government Support for Innovation: UKIP’s Production Enterprise Centres
UKIP defines innovation as “the conception of a new idea, trials on a small-scale, pilot marketing, assessment of technical and financial viability, pilot production (or roll-out of a service), sales of a product, reinvestment in design, further investment in marketing and production and thence establishment in the market.” Innovation thus encompasses both the harnessing of a wide range of expertise, and also long-term financial commitment, the totality of which is not always to be found in small companies (fewer than 50 employees) or even in medium-sized ones (50-249 employees).
Improvement will therefore involve continuous systematic thought and investment to increase production rates and efficiencies, and product quality. Where medicines are concerned, extensive field trials and national approvals are required, involving procedures likely to be out of reach for all but £1 billion corporations.
UKIP proposes to simplify the Department of Trade and Industry’s (DTI) complex, ever-changing and overlapping provision, by establishing a network of permanently staffed ‘Production Enterprise Centres’ (PECs) in which the successful knowledge transfer partnership (KTP) schemes would be based along with permanent scientific and business staff.
The centres would specialise to a degree, reflecting local industries, but would develop the character of a national resource for fostering improvement and enterprise and equipment. But, unlike the general pattern of existing university-based centres they would explicitly engage with the complete innovation and improvement process, right through to marketing and sales. Intellectual property would be shared between the progenitors of an idea and the centres. Process and product improvement would be specifically within the centres’ remit.
The centres would be financed by the abolition of the present R & D allowance (with a saving of around £1 billion) and all other schemes of DTI support, except the Knowledge Transfer Partnerships (KTP). The money released will be provided in the form of Vouchers which would be awarded to SMEs at year-end on a sliding scale related to added-value generated by an SME during the year. The vouchers could only be spent in PECs.
The PEC system would see a major reduction in the cost of the DTI, now running at £5.6 billion per annum. Regional Development Agencies would be abolished, and some of the permanent staff redeployed to the new centres. Banks would be encouraged to locate staff in the PECs to enable them to acquire expert close-up knowledge of business needs.
Further, as increasing exports is a major goal of UKIP’s economic policy SMEs need additional support to achieve this. UKIP recognises that, as with the innovation process, scale is important for exporting. While SMEs employ 50% of manufacturing staff, their contribution to exports is disproportionately small as a result of their size and range of product and also their fears of trading in countries speaking foreign languages and using different legal systems.
UKIP proposes to include within its proposed network of Production Enterprise Centres a number of export units with the remit and budget to increase exports from SMEs. The units will include foreign language specialists (e.g. Chinese and Japanese as well as the European languages). They will ultimately be financed by commission on the sales of foods and services, as with any selling agent. Set-up costs will come out of the present DTI budget. The Foreign and Commonwealth Office (FCO) will be reoriented to see the promotion of sales of British goods and services as one of their two prime jobs. Liaison between the PECs and the FCO, for example in the arrangements for foreign advertising and attendance at trade fairs, will therefore be required to be very close.
9.5 Quango Reduction
UKIP has a policy to reduce significantly the number and/or budgets of quangos to reduce the burden on SMEs financially and in terms of their interference. Full details of quango cuts are found in the Budget and Economy paper.
9.6 Local Council Support
UKIP proposes that local councils seek to have an officer whose remit is to help small businesses and resolve any problems they have dealing with the various local authorities. These people will not be advisors but be pro-active facilitators who cannot be thwarted by the attempted use of exemption under the Freedom of Information Act.
At present, it is legal for a company to run up heavy debts, go bankrupt to avoid paying those debts, buy back the assets at a minimal cost from the liquidator, and then recommence business with the same personnel, assets and premises. UKIP will make this practice a criminal offence.
Goods with unpaid invoices will remain the property of suppliers and be returned to them by the Liquidator. It will be the Liquidator’s responsibility to ensure they are returned, and in a reasonable timeframe. UKIP believes company assets should be offered first to the normal creditors by auction. UKIP recognises Liquidators cannot by law sell assets at under market value. Only then can the previous bidder be allowed to bid for them.
9.8 Formation of a Small Business Council
UKIP would seek to form a Small Business Council of small business owners with practical experience as well as experience of lobbying government on small business matters. This Council would liaise directly with important SME representative bodies such as the Federation of Small Businesses (FSB), on measures to support SMEs.
9.9 Internet Access
UKIP will press phone and cable companies, and incentivise them where necessary, to extend quality, high speed internet to every home and company regardless of their location. This is a vital investment in the future of the country.
9.10 Works Committees and Trade Unions
UKIP will examine the case carefully for works committees of employees being set up in companies. UKIP would need to be convinced that workable, strict procedures could be introduced to prevent mischievous individuals trying to gain control.
Case Study – Control of Asbestos Regulations
A good example of the multitude of excessive regulation are those concerning asbestos removal. Open Europe gives the cost of these regulations as a ‘mere’ £46 million per annum, but they are another good example of how lobbyists and the EU conspire to produce the worst possible outcome. It is possible that the original regulations were based on the very real dangers posed by blue or brown asbestos – the use of either of which has been prohibited in most countries since the 1980s – and white asbestos, which is chemically unrelated.
Any rational look at the dangers of white asbestos embedded in the fabric of buildings shows that it is minimal – and in any case a fraction of the dangers associated with removing the offending material or demolishing the building.
However, contractors have long realised that there is a lucrative market in asbestos removal, and so they keep the pressure on the EU and national governments to go along with the pretence. The total turnover of the asbestos removal industry is tens of millions of pounds a year for dealing with a largely imaginary problem, every penny of which is a burden on the economy, and the costs can ruin an individual business whose premises are declared unsafe.
This is a prime example of ‘barriers to entry’, and how EU regulations tend to favour larger players and burden SMEs (besides the immediate cash cost to SMEs who are forced to pay for unnecessary asbestos removal). The level of skill required to remove asbestos from building is little different to any other renovation or construction work, so the asbestos removal industry has protected itself against competition by ensuring that only firms certified by the Health & Safety Executive are authorised to carry out the work20.
As a rough guide, assuming women between the age of 20 and 35 make up a fifth of the working population, and each has two children and takes a total of three years off work in that fifteen year period, on average, one per cent of the total workforce will be on maternity leave at any one time.