The white heat of technology, parts 66 to 93

Hot on the heels of my post of a few minutes ago, here's how these things tend to fizzle out as reported in this morning's CityAM:

THE government's track record for investing in small businesses came under fire yesterday by the Committee of Public Accounts.

A report by the Committee said that the government's management of its venture capital funding initiative for young businesses with prospects for growth needed improvement. Some of the concerns listed by chairman Edward Leigh included a lack of prioritised objectives for the funds, the poor regional distribution of funding and the lack of published information on the performance of the funds up until December last year.

"This report confirms Labour's woeful venture capital record. Their funds have made losses not returns and the taxpayer has rewarded fund managers for their failure," said Shadow Business Secretary Ken Clarke*.

The programme has 28 funds.

* The CityAM newspaper appears to be unashamedly pro-Tory. They give a favourable mention to one of The Tories' bright ideas here:

Last week, I heard Mark Prisk, the shadow minister for trade and industry speak about the changes that the Conservatives will make if they win the coming general election. They will give small businesses a one-year break on national insurance contributions for their first ten employees. This should go some way to encouraging start-ups to hire employees again...

How on earth is that going to work? What counts as a start-up? What about a small but mature business that will never employ more than ten people? If you employ eleven people, would it be in your interests to sack two of them and reinstate one?

Why not just phase out Employer's National Insurance and have done with it, even if the price of that is increasing corporation tax or Business Rates - remembering that in the real world...
(a) start-ups that are investing in growth make little or no profits and so pay little or no corporation tax, at whatever rate;
(b) UK employers pay rather more in Employer's National Insurance than they do in corporation tax; and
(c) start-ups are almost certainly tenants and not owner-occupiers, so higher Business Rates won't really affect them as it would depress the rents they pay in equal and opposite measure. Of course, higher Business Rates wouldn't affect really really small start-ups at all, i.e. one-man or one-woman bands who are working from home.

Thinking on, if they want to 'incentivise entrepreneurship', why not just scrap capital gains tax, which raises bugger all in the grander scheme of things? And seeing as nearly all UK businesses start off by selling domestically, how about a reduced rate of VAT on the output of UK manufacturers - remembering that UK businesses pay twice as much in VAT** as they do in corporation tax and unlike corporation tax, VAT can push a marginal business into making losses?

** Cue somebody who says "But the consumer pays the tax!" Bollocks. The clue is in the name. It is a tax on "value added" i.e. a tax on gross profits.