I t would be nice to confirm what Gordon Brown really thinks about business. It would be even more interesting to see how well he would run a small company. Can you imagine? All that anger and frustration channelled into his poor employees.

I would particularly relish his management of the bonus programme. I presume it would be annual, but just before the bonuses were due, he’d halve the funding pool in case one salesman, who had done rather well, got too much.

Just like his approach to capital gains tax (CGT). People risk all to set up businesses and grow them. They motivate their employees with stock options, calculate how much they will have to grow to sell safely into retirement and then Brown scuttles the system.

Brown bombs again

This is on top of raising corporation tax on small businesses by 2% – and that no matter how much tax we pay, it never seems to be spent effectively. But the impact of abolishing CGT taper relief is more pernicious. As a country, we already suffer from too little risk capital invested in businesses. This will dampen whatever enthusiasm there has been.

It also has a raft of unintended consequences: buy-to-let owners benefit, while small business owners suffer; and everyone suffers because Alistair Darling couldn’t craft a tax policy that dealt with the inequity of private equity partners getting income treated as capital gains without everyone else being penalised at the same time.

This government already spends billions on programmes to encourage investment in small business, much of which is ineffective. The Small Firms Loan Guarantee scheme has been made more restrictive, the SMART programme has been regionalised for political purposes, and venture capital trusts (VCTs) pursue an equity gap at the wrong place with the wrong instruments. The list goes on…

We need a clear-out. All the quangos, support programmes, advisers and tax manipulations should be dumped, and CGT should be reinstated, but in a more rational way. Taper relief should begin the day you invest in your business and progress linearly until there is no tax at all. This would encourage the behaviours we want and would be cost neutral if we turned off the other ineffective programmes.

Disappearing s u pp o rt

The government has announced its own Business Support Simplification Programme to reduce government support programmes from 3,000 to 100. These would be the same programmes they implemented in the first place. I would be cheered by this news, but it means that the savings from all that activity, which was supposed to be supporting small business, is not earmarked for small business any more. So the support we already had, however ineffective, has gone too.

It’s a shame Brown doesn’t understand that small businesses are not the enemy. In fact, we are the sole reason there’s any wealth to tax.

About the Author

Doug Richard is chairman of research group Library House and the Small Business Task Force. An experienced technology entrepreneur and investor, he was also an original Dragon in the BBC’s Dragons’ Den .

www.libraryhouse.net