It is, of course, impossible to disagree with David Cameron, the UK’s Prime Minister, when he says that supporting Britain’s entrepreneurs is the only possible strategy for growth.

He has come out to declare war on the ‘enemies of enterprise’ ... but with a classic bit of blame shifting.

Entrepreneurs are currently even more important to their countries than usual. Governments like those of the UK and the USA are now being forced to cut state spending after years of extravagant expenditure and dangerous deficits. They have no choice but to rely on private sector growth to take up the slack, and small and medium-sized enterprises generate most private sector growth.

Britain’s previous government was also full of warm words about entrepreneurs, but it is difficult to recall a single occasion when, given a straight choice between enterprise and ideology, government backed enterprise. OK, they did reduce the rate of capital gains tax but the politics of envy won out and a ridiculous cap was placed on lifetime gains.

Cameron has yet to prove he is any different. Though what he says is obviously true – any economy is only as strong as its entrepreneurs – he has put all the blame on bureaucrats.

Though bureaucrats have been, and remain, the source of much needless grief and forfeit of economic opportunity, the more pressing problems are the regulations governments have given them to enforce and the burdens of tax all businesses face.

After the best part of a year in power, Cameron has done nothing substantial to reduce these problems.

On the contrary, the first time he was offered that choice between enterprise and ideology, he went the same route his immediate predecessors would have gone, when he decided to implement their notorious Equality Act despite vigorous protests of the whole business community.

It was the only real test to date of his seriousness about business – and he failed it.

We are not asking for government handouts or special treatment or gimmicky programmes. All we want is to be allowed to do what government is asking us to do.

Alas, though, the government has tied its own hands. It has made foolish policy announcements in support of tax rates that penalise success and ‘family friendly’ policies that translate into anti-business employee rights legislation. Added to that, it continues to support international treaties its predecessors signed that do little more than make our economy uncompetitive.

Mr Cameron’s words are still welcome, though he has a long way to go if he wants to prove that they are any more than just words. He has told us the forthcoming budget will be the “most pro-growth [Britian] has seen for a generation".

Somehow, we know we’re going to be disappointed.

This blog is posted in conjunction with our recently released podcast #128 – The Peasants’ Revolt

The key to influence is being in the room when the big decisions are made.

Ideally, you should be physically present: few can ignore completely a person who is right in front of them. Next best, if it is impossible to be there in person, is to have someone in the room who will represent your interests faithfully and actively. At the very least you need to have someone in the room who is aware of your existence as a factor to be taken into account.

The problem for most entrepreneurs and small businesses is that we are rarely in the room. We like to think we make our own decisions and control our own lives – indeed, many of us went into business for ourselves precisely because we do not like being told what to do – but the truth remains that we do not make many of the decisions that have greatest impact on our businesses. They are made for us – without our asking – by politicians and bureaucrats.

They can decide to interfere with any aspect of how we run our affairs. They can decide to tax us or grant us access to contracts. They can decide to make economic conditions better or worse –usually the latter. We have no say in what they decide.

So we need to get someone in the room where they make their decisions. The problem is that the rooms in question are filled entirely with bureaucrats and – sometimes – politicians. Occasionally the odd representative of the banks or big business might be allowed in – but, as far as the people in the room are concerned, we do not exist, either as individuals or as a small business sector.

Here is how political influence works in the West...

Overt bribery is rare. However, wealthy individuals, corporations, or front organisations, or lobbyists acting on their behalf, can and do make very large donations to funds close to the hearts of powerful politicians. These funds may be the politicians’ own campaign chests, or their parties, or other organisations in which they take a benevolent interest. A donation to a charity which has a politician’s wife on the board of trustees can be as effective as a direct gift to the politician himself.

It is important to stress that an experienced lobbyist will never so much as hint that a deal is being made when he makes the donation. The politician would almost certainly walk away with a fine display of disgust if there was the slightest suggestion of “We are doing you a favour, and we hope you will remember it when we ask you for a favour”.

There is not so much as a nudge, a nod, or a wink.

It is enough that a channel of communication has been established. This may mean that the donor has direct access to the politician, but it may be sufficient if the donor has access to the person who runs the fund to which he donates, if that person has the politician’s ear.

A politician may pay more attention to his campaign manager whispering “We should be nice to this guy” than to the donor himself.

Either way, the important point is that the politician now knows that the donor exists. When the politician goes into the room where decisions are made, that knowledge goes in with him. The donor himself may not be present, but he is a factor to be taken into account. There will be other factors, which may turn out to be more important, but the donor has at least bought the right to be taken seriously.

For most individual entrepreneurs and small businesses, this is not an option. For one thing, as individuals, we lack the sort of money necessary to make a real impact. We could, of course, raise it collectively – there are over four million of us in the UK alone – but the whole point about entrepreneurs is that we do not like doing anything collectively.

If there are more than four million of us, then there are more than four million sets of opinions and divergent interests.

Yet most of those millions also have certain interests and opinions in common. We need to find a way of getting them across to those in power who are currently ignoring them.

We need to get into that room.

“Guerrilla art” can make its point very effectively. After a – now forgotten – stock market crash in 1987, sculptor Arturo di Modica, made a 7,000 lb bronze bull at his own expense and installed it, without permission, in front of the New York Stock Exchange, as a reminder of the “strength and power of the American people”.

In the early hours of Christmas day, street artist Olek covered the bull with a charming all-over sweater as a gesture of her own warmest wishes for the New Year.

Alas, bureaucrats have got worse since di Modica’s original installation. Almost immediately, a park keeper cut Olek’s lovely bull cosy to pieces with scissors and dumped it.

The irony is that the bureaucrat’s nastiness provides the perfect third act to a work of street performance art that symbolises where we are with uncanny accuracy.

Di Modica’s bull has indeed come to symbolise the resilience of the American people in particular and the global markets in general. Just as the statue is still with us, so are the strengths it represents. Yet Olek’s woolly covering reminds us that, however strong it appears, the bull needs to be loved and looked after. The bureaucrat’s destruction of that covering is itself symbolic of the unhelpful attitudes of officialdom – which never wanted the bull in the first place and does not care if it is left out in the cold.

This is exactly where we stand on the threshold of 2011. Free enterprise has proved its resilience yet again, but recovery remains fragile, and government needs to be more sympathetic.

Yet the New Year finds us finds us cautiously optimistic. There is a now a more realistic attitude in business and political circles. Gone is the hysterical optimism that preceded the 2008 crash and the equally hysterical pessimism that followed it.

Even politicians seem to be growing up. President Obama’s deal with the Republicans on extending the Bush tax cuts gives hope that a bipartisan approach to America’s problems may be possible. The British government is taking mathematics seriously at last. The Germans are imposing discipline on the euro. Several potential crises – in Dubai, Greece, and Ireland – passed without panic. These are all encouraging signs.

The next year will be tough for many, but most will see slow improvement. That said, any predictions must end with the one that is always proved right: expect the unexpected.

Britain’s new economic strategy is sound: cut the wealth-consuming public sector and expand the wealth-producing private sector.

This is no more than simple common sense. Yet the UK’s public sector has been expanding for years while the private sector has not been growing as it ought. The laws of mathematics tell us that the inevitable consequence of increased expenditure and insufficient income is debt. It is a shame that it took a recession to force Britain to face that reality and try, at last, to reverse both trends.

The problem is that, in adopting this laudable strategic objective, Britain’s new Coalition government has no idea how to achieve it.

Here is how to do it. Do not try. Just let business get on with it. If the politicians and bureaucrats would leave us alone – and by that we mean take away all their meddling, interfering regulations, rules and compliance burdens – the private sector would not only achieve their objective of taking up the slack of the reduced public sector but would go on to expand far more than their narrow little minds could ever imagine. History proves this.

However, the politicians do not really have faith in this. Unless they are prepared to act on their words, business will not be able to take up the slack. The strategy will then be perceived to be failing, then blamed, then abandoned – without really having been tried.

If they rely on business, they must trust it. They must take us seriously when we say that legislative interference like the “Equality Act” in the UK, the maternity proposals of the EU, and the poorly drafted healthcare reforms in the USA, will prevent us from completing the tasks they have assigned us, to generate income and employment.

They must also understand that no government schemes or spending programmes designed to “help” business can make up for that interference. For President Obama to tout a “Small Business Bill” after approving the pork barrel of the stimulus package and federal healthcare is like shooting a man in the guts and then offering him a Band Aid.

Similarly, the language of the new British government is suspiciously reminiscent of its unlamented predecessor, which thought a few handouts to selected businesses – its friends – could compensate for increased tax and regulation that drove businesses and jobs abroad.

Message from Business to Government: Yes, we can take up your slack for you – but only so long as you do not try to “help” us – just get out of our way.

A controversial candidate in this year’s US Senate elections feels that the media are not portraying her as she really is, so she came up with a clever little advertisement in which she looks at the camera and says “I’m You”

...only to be met with entirely predictable chorus of “Oh No, You’re Not”.

Yet the question implied in the advertisement is a good one. Who in government is “Us”? In particular, who among our hundreds of thousands of bureaucrats and politicians really identifies with the millions of hard-working entrepreneurs who generate all the wealth and pay all the taxes to fund our rulers’ expensive lifestyles?

In the UK, we are ruled by an independent political class that is increasingly divorced from the real world. The leaders of all three major political parties look like clones – all thin, dark-haired males in their early forties with the same privileged background, Oxbridge degrees, and not a single day of real business experience between them.

The same description, sometimes with slight variation, applies to most of the people around them. The fact that they know nothing about business does not stop them interfering with it. Indeed, the more ignorant they are, the more they want to interfere.

Real businessmen are, of course, too busy running their own businesses to respond in kind. At best they might take a break long enough to write a letter to the newspapers, like the one signed by 35 leading British businessmen urging the government to be firm on cutting state spending. These letters can do some good. A similar letter just before the May general election stimulated a long overdue debate on payroll taxes.

Yet it would be a mistake to think that 35 of the highest paid executives in the country speak for all five million British businesses – some of whom are frightened by the prospect of cuts because they depend on government contracts. Nor are the five million represented by Sir Philip Green, Chairman of the Arcadia Group, who spoilt an excellent report on government waste by suggesting the state should delay payments due to private business. Late payment by government has long been identified as a major source of cash flow crises.

Big business and the banks have a fairly loud voice, but who speaks for the vast majority of those five million, who are small businesses or self-employed entrepreneurs?  We do not trust the fat cats of the CBI to speak for us, nor moribund Chambers of Commerce, nor the ineffective FSB, nor a celebrity “czar” ...

nor the bankers who are always being brought into government – our second worst enemies joining our worst! Where is our voice?

What do Pepsi, Kraft, DuPont, Xerox, and Johnson & Johnson Pharmaceuticals have in common?

Two things: all would be on any list of archetypal American industrial conglomerates – the sort caricatured as being run by fat men with top hats and cigars – and all are, in fact, now being run by women Chairmen.

Note that they all use the title “Chairman”, not “Chair” or “Chairperson” or “Chairwoman”. That is in itself significant.  Public sector types get very worked up about women not being in positions of authority, and see “inclusive” nomenclature, tokenistic quotas, and legislative nonsense like Britain’s Equality Act (have we mentioned that we dislike it?) as the best way to promote women. 

The private sector adopts a different approach – it simply rewards success, irrespective of gender.

The irony is that the relaxed private sector actually has a better record of putting women at the very top of the pyramid than the obsessed public sector. You do not see many women Presidents, Prime Ministers, Governors, or Mayors of major cities, but you are seeing a lot of women CEOs and EVPs – future CEOs.

A system based solely on merit actually favours talented women more than public sector tokenism.

More than that, every woman who heads a company in the private sector – from a part-time small business to a major multinational – knows she is there because she deserves it. Unlike their public sector sisters, they did not need special treatment. Every one of them earned her place. The markets would not allow it any other way.

Note also that women are more likely to reach the very top in business in the meritocratic United States than in Europe, where there is more tokenistic legislation.

Some still complain that there are fewer women in higher management in private business than men. There probably always will be. Women are more likely to desire career breaks, for obvious reasons. That is their choice, and choices have consequences. That is the nature of choice.

What is now beyond dispute is that no position in private business in the West is inaccessible to a woman with the ability and the ambition to seek it.

In this, as in so much else, the public sector, instead of telling us what to do, should be trying to copy our example.   

As we get older, we have to make a positive effort not to turn into the bore who is always complaining how much better everything used to be.

Such complaints are unwise not only because they are tedious but because they are usually wrong – most things are much better than they used to be.

That said, it can’t be denied that progress in some areas has been accompanied by deterioration in others. In particular, we may be wealthier in financial terms, but is that at the expense of something more important?

In over a quarter of a century in business, this contributor has seen a definite decline in honesty in the daily transactions of commercial life. Where we could usually proceed on the assumption that most people would make an effort to keep their word, and be fair and reasonable in their dealings, it is now almost expected that big organisations in particular will try to chisel and evade their obligations.

Of course, there have always been chancers, but the worst offenders are now the pillars of the Establishment on whose reliability the whole economy depends: insurance companies, banks, pension funds, even government.

It is increasingly rare for insurance companies to pay promptly, and in full, money to which the premium payer assumed he was entitled. Insurers claim that this is, at least in part, because they are themselves increasingly victims of fraud – which is, of course, true – but we are entitled to ask if the chicken came before the egg in that sector?

The same is true of banks. They may claim to be the victims of bad loans, but they made those loans. There would have been no 2008 crash if bank managers were still reactionary but scrupulously honest old fogeys – think George Mainwaring in the British comedy Dad’s Army – instead of City wide boys looking no further than their annual bonus.

Yet government is the worst offender – because those at the top set the example for everyone else. Public service – once considered honourable because it was underpaid – is now a cash cow, and bureaucrats regularly misuse laws passed for legitimate purposes in order to raise revenues.

Public office is now an office of profit, as it was in the 18^th Century. So far from progressing, we seem to have regressed to the time of Oliver Goldsmith: “Ill fares the land, to hastening ills a prey, where wealth accumulates, and men decay.”

The British tax system is now so complex that even the tax men do not understand it.

We always suspected it, but it is now official. HM Revenue and Customs has miscalculated the tax paid by almost six million people – about 10% of the population of the UK.

UK Treasury Building, London

It is difficult to say which is the more disgraceful: is it the fact that 4,300,000 have been forced to pay the government more than was due; or is it the fact that another 1,400,000 who assumed in good faith they had settled with the tax man for the year will suddenly face additional demands for money?

The average additional demand will be for £1,500 (about $2,250) – quite a lot of money for most people, especially those on a fixed budget in difficult times.

Viewed objectively, the most disgraceful aspect of all in this particular case is that most victims are indeed on a fixed budget, because it relates to PAYE, “Pay As You Earn”, the income tax levied on employees, who are usually on fixed salaries.

Viewed more subjectively, since PAYE is designed as a tax on employees, this particular blunder is less likely to impact directly on most entrepreneurs. However, it does beg an important question: if the tax man can make such a gigantic error in the relatively simple calculation of the taxes on fixed incomes, how many more mistakes are being made in the far more complicated calculation of taxes on entrepreneurs?

Most of us have our horror stories. Some are due to straightforward bureaucratic incompetence, but – to be fair even to the tax man – in many cases it is unfair to blame a poorly educated bureaucrat for failing to understand a system so complex that it baffles some of the sharpest minds in the land.

Everyone agrees that the system is bad, but every attempt at reform has made it more complex and therefore worse. The only solution is to junk the whole thing and start again – with a Flat Rate Tax. Some consider Flat Rate Taxes inegalitarian and therefore “unfair”. Perhaps – but surely not as unfair as a system that overcharges some, springs sudden additional demands on others, and has just been particularly hard on some of our poorest fellow subjects.

Moreover, here is a tax calculation everyone can understand:

Simple = Fair
Fair = Efficient

Some employers are becoming positively paranoid about the abuse of business internet facilities by employees.

It is certainly true that many working hours are “wasted” by employees using company time and company computers to do a bit of online surfing or shopping ... or whatever. It seems that hardly a week goes past without some bureaucrat being fired for downloading pornography on taxpayers’ laptops – thus confirming our suspicions about the sort of people who become bureaucrats and what they spend their days doing.

It is quite right – and rather satisfying – that bureaucrats are disciplined for waste of resources they are given as a public trust.

However, private business can and should apply different standards. Our best advice to anyone thinking of a drafting a policy on employee use of work computers for private purposes is “Chill Out, Dudes”.

Accept that if technology is available, then it is going to be used – and if it can be used for personal purposes, then it will be used for personal purposes. Just accept it.

If you think too much time is being lost because technology is being abused, just reflect on how much time you are saving because you have that technology. Are you really saying you would rather not have it? A degree of wastage is the price you pay for having the technology – a price worth paying.

Of course, it is possible to reduce wastage by a combination of monitoring and tight disciplinary procedure. However, taking the time to check employees’ browsing histories and follow up with disciplinary measures is just as wasteful as unauthorised surfing. More importantly, it creates the wrong atmosphere in the workplace. If you show you distrust your employees, then the best of them will seek work elsewhere, where they feel trusted and valued – and you will be left only with those who need watching.

Here is a better idea. Stretch your employees. Set them challenging targets. At worst, this will leave them less time to waste. At best, it will engage their interest, so that they do not feel the need to relieve their boredom with a little surfing at work. Indeed, they may end up doing work at home, in their own time and on their own computers.