Finance: Helping hands tied by red tape

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The Independent Online
As a successful entrepreneur in Yorkshire, Jim Lindop is something of a dream come true for Stephen Byers, the Trade and Industry Secretary, and for a Labour Government seemingly committed to creating an enterprise culture in Britain.

The founder of the Sheffield-based semi-conductor developer Jennic is not only a beacon in the country's high-technology sector, but he is making a small dent in the widely-held view that such businesses are almost totally confined to Cambridge and a few other centres in the south of the country.

And yet - unhelpfully for the ministers and their officials - Mr Lindop is decidedly ambivalent about the role the Department of Trade and Industry can play in a business such as his. He acknowledges the assistance of two Government awards totalling nearly pounds 120,000 that he has been given in the three years since he started on his own. But he says neither the first grant, when the Conservatives were in power, nor the one a year ago had caused him to take the steps he did. They merely helped.

He had largely ignored the approaches of the local Business Link and associated government-supported advisers because he felt they probably knew little about his market. "You don't want to depend on them," he says. "You've got to run your own business and make your own decisions."

It is an old adage that businesses should not be seduced by tax incentives and other measures into doing things they would not otherwise do. Many entrepreneurial companies and their advisers feel many of the "enterprise initiatives" over the past two years did not turn out to be as attractive as originally claimed, and that view is gaining increasing support.

Martin Kaye, a partner with BDO Stoy Hayward, an accountancy firm specialising in advising growing businesses, sees the value of the Government encouraging and promoting such concepts as corporate venturing, where larger companies back smaller ones to obtain access to new technology or simply for good investment returns.

But he thinks the Inland Revenue can be so concerned about "leakage" of tax they made the rules so tight or complex that businesses are discouraged from using measures designed to help them. A report by the Confederation of British Industry he helped produce says this is why there has been little take-up of the Enterprise Investment Scheme. He believes the measures are "often very good", but there's a gap between the claims made for them and what happens on the ground.

He wants to deregulate the environment for small and medium-sized companies, a view given added force by last week's publication of a survey from the Institute of Chartered Accountants in England & Wales. That indicates advisers to smaller business believe the balance between the needs of regulation and the encouragement of enterprise has substantially deteriorated in the past year. The report Small and Medium-sized Enterprise Finance and Regulation, by the institute's enterprise group finds 46 per cent of the respondents felt the balance between regulation and enterprise had become worse. Only 10 per cent felt it had got better, the survey adding: "Advisers' opinions of the regulatory regime are generally negative - and more negative than reported last year, after the new government's first year in office."

The advisers pointed to the prescriptiveness of regulations and enforcement procedures and the care with which new regulations are considered before introduction.

Encouragingly, these points are addressed by the latest annual report of the Better Regulation Task Force, set up in September 1997 to advise the Government on improving the effectiveness and credibility of government regulation by ensuring that it is "necessary, fair and affordable and simple to understand and administer".

With last week's Queen's Speech setting out legislation to reduce the regulatory burden, Lord Haskins, chairman of Northern Foods and of the task force, has reportedly been charged with ensuring senior ministers are committed to cutting red tape. "Within reason, enforcers should help people to comply rather than penalising them for non-compliance," Lord Haskins has said.

Such an approach - if adopted - would be music to the ears of entrepreneurs such as Mr Lindop, who says he spent months and "a lot of money" in the early days of his company establishing and gaining Inland Revenue approval for an employee share-ownership trust. The incentive scheme produced its first pay-out last week, when the company secured pounds 2.5m in expansion funding from Stadium Developments, the property company that got pounds 1.2bn through selling the Sheffield Meadowhall to British Land.

Mr Lindop likes the idea of employees getting employers' shares free of tax. He wants the complexity unravelled and the amounts upgraded. "We're trying to get them pounds 100,000," he says.