Why our fears over red tape are overblown

October 30, 2014 by · Leave a Comment
Filed under: Enterprise 

What would you do to help more businesses survive and grow?

If you’re like most people, you’d probably call for greater deregulation and a cull of burdensome red tape. This is what Cameron promised at the start of this year when he announced plans to drop or change more than 3,000 business rules. Regulation was also the target of Adrian Beecroft’s infamous report in 2012, which proposed introducing no-fault dismissals so that small businesses could let go of staff at will. Only a few weeks ago, a senior EU official argued for a ‘bonfire of red tape’ across Europe, which would make small and medium sized businesses virtually exempt from rules affecting business practices. The rationale for these moves is clear: cutting red tape would reduce the risk and costs of doing business, and thereby encourage entrepreneurs to innovate, expand and take on staff.

Yet if this sounds too good to be true, that’s because it is. The reality is that red-tape just isn’t as big a deal as we like to make out. The OECD, for example, reports that the UK has the third least regulated labour market in the world – so flexible, in fact, that it is thought to be easier to dismiss someone here than in the US. Similarly, the World Bank consistently ranks this country as one of the easiest places in the world in which to do business – ahead of Germany, France, Japan and many other developed countries. The government also continues to enact measures that make the labour market more flexible for the benefit of employers. Last year saw the introduction of new fees of up to £1,200 for any workers seeking to make a tribunal claim. As a result, the number of employers being taken to tribunal have plummeted.

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The illusion that is the decline of deference

October 23, 2014 by · 1 Comment
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Regular readers of this blog will know that the RSA has a new worldview called the Power to Create. In short, this is about helping more people in more places to turn their ideas into reality, and thereby become the authors of their own lives. The animation below gives you the gist of what it’s all about.

I broadly subscribe to the vision, except for one assertion: that people are clambering for greater power, and that this is partly down to a decline of deference for the elite. If anything, I think large parts of society are in danger of becoming more docile and revering. As Nick Cohen put it not long ago, ‘the British have no fight in them anymore’.

True, the approval ratings of politicians have plummeted over the last few decades, and it’s hard to see how they could get any worse. Likewise, we know that the religious clergy have lost much of their influence, with ever dwindling numbers turning up to church each week (though the story may be different for non-Christians). Scotland Yard and Fleet Street have also lost huge amounts of respect, in large part due to never-ending scandals. Even big business is seeing its authority undermined. Surveying by Ipsos Mori has found that only 34 per cent of people believe business leaders can be trusted. Read more

Long live the maker revolution

October 2, 2014 by · Leave a Comment
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This is a guest blog by Helen Kemp, Founder of Just Got Made. JGM is a directory that links creative small businesses with hand-picked suppliers and producers. Find out more at www.justgotmade.com

We are at the forefront of a Maker Revolution! This time around it’s not about large factories but involves thousands of talented individuals; craftspeople, designers, artists and makers, working from their dining room table or studio desk.

There needs to be a new way for companies to connect, to reach each other in this new landscape of cottage industries working on a global scale. And that’s where Just Got Made fits in. We are part of the toolkit for the next generation of makers.

I grew up in the London suburbs, obsessed with the 90’s grunge scene and immersed in the alternative cultures running through music, fashion, photography and art. The DIY ethos of independent culture got into my blood and instilled in me the conviction that independence is a powerful driver of creativity.

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Why the self-employed need to wake up to the threat posed by Universal Credit

September 25, 2014 by · 5 Comments
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In theory Universal Credit is a dream policy. The idea has been to streamline the welfare system, rolling six means-tested benefits into one so that work will always pay. UC is also intended to make the transition in and out of benefits more seamless, and as such accommodate workers whose income fluctuates and who find themselves flitting between jobs. In 2012 DWP estimated that an extra 300,000 more workless households would move into employment as a result of UC, and that it would save £38bn over 12 years from its inception.

Yet as we all know, the hype has not lived up to reality. Universal Credit has proven to be something of a nightmare. Indeed, it is hard to overstate the problems that have beset this flagship welfare scheme. IT failures, civil servant departures and a lack of departmental resources are just a few of the reasons for Universal Credit’s woes. Such are the challenges facing the £2.4bn scheme that the Major Projects Authority in Whitehall decided it needed to be ‘reset’ in 2013, while £34m of new IT assets had to be written off as a result of unexpected difficulties. To top this off, a damning National Audit Office report noted that ‘throughout the programme the Department [DWP] has lacked a detailed view of how Universal Credit is meant to work’.

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Cash-poor, asset-rich: are the self-employed better or worse off?

August 29, 2014 by · 5 Comments
Filed under: Enterprise 

Last week I argued that the concerns over shrinking self-employed earnings may be a little exaggerated. Coincidentally, at the same time the blogger Flip Chart Rick convincingly proposed the opposite: that we aren’t half as worried as we should be.

Clearly the jury is still out. So while we’re in the debating mood it might be worth adding another layer to the debate – that of wealth and asset ownership.

As part of our new project with the Joseph Rowntree Foundation, we’ve been looking at the data on earnings, wealth and debt. And while some of the findings are unsurprising, there are a few curveballs in there too.

Here are a few initial observations to chew over:

#1 – The full-time self-employed earn around 20 per cent less than their employed counterparts, and their income has fallen by 10 per cent in real terms since 2000


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What’s happening to the earnings of the self-employed?

August 22, 2014 by · 3 Comments
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This week the ONS published a brief report on the rise in self-employment. The headline is that the number of people working for themselves has reached a record 4.6 million, the equivalent of 15 per cent of the workforce. This is the highest figure since records began 40 years ago.

Yet it wasn’t the aggregate numbers the media paid attention to. It was the stats on their earnings, which the ONS report had fallen by 22 per cent in real terms between 2008 and 2012 – quite a staggering fall. Others have highlighted a similar trend, including ourselves and the likes of the Resolution Foundation. In short, the message of the data is that while being your own boss may be more fulfilling, it can also be financially precarious.

While I broadly subscribe to this position, I do increasingly wonder whether we may be exaggerating the income crashes and shortfalls of the self-employed. Here are three reasons why:

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New RSA and JRF project: Boosting the living standards of the self-employed

August 4, 2014 by · 3 Comments
Filed under: Enterprise 

This week the RSA and the Joseph Rowntree Foundation launch a new project exploring the living standards of the self-employed. Over the course of the coming months our aim will be to pinpoint the particular economic and social challenges facing people who work for themselves, consolidate emerging thinking around how these might be addressed, and build up a network of support organisations willing to collaborate on the development of practical and policy interventions. The rationale for the project is unpacked below.

Self-employment in the UK is growing rapidly. Since the turn of the century there has been a 30 per cent increase in the number of people working for themselves, which equates to an extra 1.4m workers. The result is that 1 in 7 of the workforce are now self-employed – one of the highest figures in living memory. Nor does this trend show any sign of coming to an end. Over the last 6 months alone an extra 300,000 more people have turned to self-employment. Should these rates continue, the RSA predicts that the number of people who work for themselves will soon be greater than the size of the public sector workforce.

The fact that this community is growing is seldom contested. Where there is disagreement, however, is in what lies behind the boom and whether the growth in self-employment is a ‘good thing’ for those involved, as well as for the nation as a whole. For some, the increase witnessed in recent years is a sign of a fragmented labour market and a deeper malaise in the wider economy. For others, the trend is indicative of a resurgent entrepreneurial spirit in the UK, and as such should be welcomed and actively supported.

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Welcome to the world of Bertrand competition on steroids

August 2, 2014 by · 1 Comment
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Joseph Louis François Bertrand (1822 – 1900)

Ever heard of Bertrand’s theory of economic competition? You should have, because we’re entering the era of the Bertrand economy on steroids.

His theory is a simple but profound one: when firms produce almost identical products they will compete by reducing their prices until they reach the marginal cost of production (the cost of making each unit of the good). Think of two bike shops vying for customers, both of which chip away at their prices tit-for-tat until they hit the cost of making each bicycle.

To this day, however, Bertrand’s theory has remained exactly that – a conceptual model that economists tinkered away with but the wider world duly ignored. The reason? Because it rested on a number of assumptions that have been implausible ever since he formulated the model in the 1880s. Namely that customers have all the information to hand about the prices and quality of products, and that they are within distance of all the businesses selling the item in question.

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Capital, capital, capital: Why there can be no Power to Create without a property-owning democracy

July 16, 2014 by · 1 Comment
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The late John Rawls, a passionate advocate for a property-owning democracy.

The RSA has a new narrative called the Power to Create that will define our work over the coming years.

Simply put, this is about enabling more people in more places to realise their ideas and shape the world around them – or, in the recent words of Matthew Taylor, ‘to be authors of their own lives’. In practice this could mean anything from starting a business, to running a campaign, to shaping the delivery of public services. One of the best examples I’ve come across recently is that of the students at Manchester University, who took it upon themselves to challenge (and offer an alternative to) the neo-classical economic theories that were dominant in their teaching.

We may quibble over definitions and semantics, but I doubt anyone could really disagree with the sentiment behind the Power to Create. The real question is how to nurture this capability. Over the course of the 20th century the consensus was (and still is) that the ability of people to ‘get ahead in life’ is fundamentally determined by the quality of their education – technical but also generic. Blair’s mantra of education, education, education epitomised the widespread view that with a few qualifications and a university degree the world is yours for the taking. It’s one reason why education remains such a politically toxic arena, from the debates over grammar schools to the backlash against rising university tuition fees.

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The Mammoth and the Minnow: A tale of barbellisation in the UK economy

July 9, 2014 by · Leave a Comment
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With all the talk of start-ups and self-employment, you’d be forgiven for thinking that the days of the big business are numbered. But as it turns out, they’re undergoing something of a revival themselves.

A quick look at the data from the Inter-Departmental Business Register shows that the two business types with the fastest growing population sizes are those with 0-4 employees and… 1,000 plus employees (see graph below). In other words, it’s the very small firms and the very large ones that are becoming more prominent in our economy. (The IDBR isn’t as reliable as the Business Population Estimates, but it gives a more detailed breakdown of the population sizes among larger firm groups).


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