Andrew Dilnot was director of the Institute of Fiscal Studies for many years. Now he's Principal of St Hugh's College Oxford and the university's pro-Vice Chancellor.
This evening he made a complete fool of himself as the after dinner speaker at the Oxford Centre for Business Taxation's dinner. He took it upon himself to address his comments to Alastair Darling, who was not present, of course. He suggested that that a Chancellor should not make policy for presentation purposes, have a reason for all policy and think through the consequences of that policy before enacting it. In principle that might be sound, but it was delivered with a political subtext that was as unwelcome as it was unfunny and which confirmed (again) the lack of objectivity of this place, and the IFS come to that.
But worst of all, he used as example of an ill thought out policy the 0% corporation tax rate small businesses enjoyed for a period in the UK. I agree with him, this was poorly thought out. But it's his analysis that led him awry. He said he presumed this policy was created because it was assumed that small businesses were either a) new or b) entrepreneurial or c) this was actually a disguised social policy for the poor engaged in such activity. His claim was that the reality is much simpler. Small businesses, he suggested are simply bad at what they do. They have to be or they would not be small.
I'm sure that I wasn't the only one who thought that he should a) not make statement for presentation purposes b) have a reason for all he says and c) think about the consequences before doing so.
What made this especially odd was that his opening "funny" referred to his annual speech to new students in his college. He apparently assures them that now thy have arrived in Oxford they no longer need to try to be cool. They can just be nerds, because that's what Oxford wants. Well, I can tell you, his college has certainly got one.
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Thank god these people stay in the confines of a research institute/university.
Those who can will always try and run a business in the UK, and yes many will fail, and yes many will get up and try again, and then there are ‘life style’ businesses and small business that likes being just that, and then we have those who, well those who teach, or carry out research!
Good job I wasn’t there, or I’d have been sorely tempted to punch him on the nose 🙂
Jason’s right – “life style” and small businesses do exist and they aren’t small because they’re not good at what they do. Many small business owners have chosen to keep their businesses small.
I read a book recently by a gentleman who was a vet in Devon. His practice was initially just him. Then he took on first one assistant, then 2 more.
He ended up doing all the administration of the practice and none of the actual treating of the animals which was what he had wanted his career to be.
So he sold his practice and set up again on his own.
He chose to be small so he could concentrate on being a vet instead of running a business.
Sensible guy.
M
M
I just seethed and my applause was notably absent after he finsihed. I was not alone, is all I can say in defence of some of those present.
Richard
Dilnot sounds about right to me. It’s true that some small businesses choose to be small, and that some are good but niche, but when you set tax policy you aim at the generality. Just because I can name a few good but small (and I can, I even like to think I run one) does not mean the majority are the same. And the fact is that the vast majority are in it to grow, but haven’t. Why not? Well if mine doesn’t, it’ll be because I wasn’t good enough. Thinking that because good businesses often start small that therefore all small businesses are good, is not clever. Nor is the abuse instead of argument.
James
You’re simply wrong.
97% of businesses are small.
Some are badly run but wanted to grow. I agree with you on that. They whinge about beauracracy as an excuse for not doing so. But they’re a minority.
The majority have no desire to grow at all.
I base this observation on having been an accountant in practice for 25 years servinf, primarily the SME sector.
Richard
Then why do they come to an accountant, Richard? To maximise their losses? I don’t for a moment believe that the majority don’t want to grow. But it is evident that few succeed. I think you may be confusing self-employed with small business, as Jason does. I’ve had a look around at this issue and it seems like this tax break had the effect of persuading a lot of self employed to become small businesses, with no change in their performance, just a change of name, so the tax break clearly had the effect of people just relabelling what they do, and there’s clearly a distinction in Dilnot’s mind between self-employed (like a researcher or freelance lecturer) and small businesses. Seems to me he can only have had the latter in mind, or I’d agree with you. But that would make no sense at all. So let’s keep the two separate. I can imagine the self-employed wanting to stay that way, free to take contracts where they like, etc, but I just don’t buy that ‘the majority’ of those who have the drive to set up a fully fledged business don’t care about having more business. If we’re talking observations, no-one, I mean no-one I know in the various business groups I’m part of is content to sit there.
James
People see accountants to ensure they comply with tax and company law. Few small business accountants can or do offer useful advice on entrepreneurial activity. That’s because they’re not entrepreneurial. That’s not to cndemn them, but let’s be clear, the person who is happy completing tax returns is rarely going to be a go-ahead business person. They’re different mind sets. So that’s point 1 dismissed.
As for your second point, let’s be straightforward about what you’re saying. By your defitnion small enterprises that want to grow are called small businesses, those that don’t are called the self employed; ergo small businesses always want to grow.
Unfortunately that’s not true: they’re all small businesses and you and Dilnot are wrong.
Richard
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